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First Direct Gold Card and cash advance fee for voucher purchase, and other similar payments

Hi everyone

I checked my First Direct account balances this morning as I normally do and noticed a £3 cash advance fee on my Gold Card. To be clear, I never use credit cards for cash because of the fees and the compound interest, it's just an awful idea unless you have no other option. So I was quite confused about where this charge came from. I called them right away and explained everything and was told that the fee is not just for taking cash from an ATM, but also for other "cash like" purchases, such as buying foreign currency (fair enough), or... buying gift vouchers. As soon as he said vouchers I knew what it was going to be in relation to - I bought exactly that online on Monday as a Christmas gift, a transaction from Theatre Tokens that was processed by Paypal to my Gold Card.

I've been doing this for years - almost everything I buy (aside from groceries) goes through my credit card, including vouchers, sending money to friends/family via Paypal, etc. This is the first time I'm aware of that I've ever incurred such a charge for any of those purchases. The FD rep told me this is how it's always been, and it's because the retailer has put the payment through as a cash transaction. By the sounds if it, that's how it should work for the afore mentioned types of payments, but apparently also for donations to charity, gambling, and other similar 'cash like' products.

I'm pretty shocked to learn all this. I've searched through the card T&Cs and it does mention the following:

"Cash related payment: Buying travellers’ cheques, foreign currency, purchasing money orders and other similar payments"

Unfortunately 'other similar payments' is not defined anywhere. The latest charges documentation from FD says something similar:

"Cash Advances - 2.99% handling fee, minimum £3.00 (includes cash withdrawals both in the UK and abroad, Internal Transfers, the purchase of foreign currency, travellers' cheques and certain Balance Transfers, but not gambling transactions)."

Interestingly it specifically mentions gambling is not charged like this, despite what the FD rep told me on the phone.

So I'm here to ask - is this normal? Is this industry-wide? Should I be looking for a different credit card that I'll be safe to use for voucher purchases or sending money to friends with Paypal or donating to charity? Or should I be changing my habits and using my debit card more often...

Thanks!

Comments

  • They charge fees usually based on what the seller classifies the goods as using the relevant codes i.e. if the seller has a gift voucher classified as cash, the firm will charge based on that
  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    edited 1 December 2022 at 11:52AM
    Shadzilla said:

    So I'm here to ask - is this normal? Is this industry-wide?
    Yes.  ...ish.
    The bottom line is that it always depends on the MCC (Merchant Category Code) that's assigned.  Buying foreign currency, for example, is always treated as a cash transaction.
    Gift vouchers are always a tricky one.  If you buy a gift voucher from Tesco at the till, along with your weekly grocery shop, the whole transaction will just go through as "Tesco Retail" (I don't know what the actual name for it would be, that's just an example, but the point is that it'll be classed as a "normal grocery shop").
    If you buy gift vouchers from a website that sells nothing but gift vouchers, there's a high likelihood that the MCC will categorise it as such and it will be treated as a cash-like transaction.
    It does catch a lot of people out unfortunately.  It's safest to use a debit card if there's any chance of it being classed as a cash transaction.

  • DullGreyGuy
    DullGreyGuy Posts: 13,988 Forumite
    10,000 Posts Second Anniversary Name Dropper
    Were you logged into your PayPal account when you made the payment? Surprised that it would have identified to the card issuer anything meaningful about the ultimate recipient of the funds. 
  • Thanks. So as annoying as it is, it seems like my frustrations should be with the retailer and not First Direct and there's probably not a whole lot of point in looking for a different credit card on this basis alone?

    I was logged into PayPal when I made the payment, as I always do. Having just read the article about PayPal and Section 75 though I'm going to alter my use of PayPal going forward.
  • DullGreyGuy
    DullGreyGuy Posts: 13,988 Forumite
    10,000 Posts Second Anniversary Name Dropper
    Shadzilla said:
    Thanks. So as annoying as it is, it seems like my frustrations should be with the retailer and not First Direct and there's probably not a whole lot of point in looking for a different credit card on this basis alone?
    All credit cards have rules on "cash like transactions" and all use the MCC to identify if something is cash like. 

    The wording/examples listed for cash like transactions does vary significantly between providers but the application appears closer in practice. There are fairly regular threads on here from people getting stung when paying governmental departments or investment firms.

    A lot however slip through the net because businesses offer multiple services/products and allow you to bundle them so a gift card run through a Tesco till wont attract it because their MCC will identify it as a supermarket transaction. 
  • DullGreyGuy
    DullGreyGuy Posts: 13,988 Forumite
    10,000 Posts Second Anniversary Name Dropper
    Shadzilla said:
    Thanks. So as annoying as it is, it seems like my frustrations should be with the retailer and not First Direct
    Well actually, it's the credit card provider that decides which MCC they allocate to a retailer.  So to be pedantic it's neither First Direct nor the retailer's fault - it'll be Visa or Mastercard (whichever one First Direct use).
    Most MCCs tend to be common across all cards providers, so for instance Visa, Mastercard and Amex would all classify William Hill as "Gambling", and all would classify travellers cheques or foreign currency as "Cash".  There are some differences, but for most practical purposes they tend to be the same.
    The MCC list of all codes is an ISO thing and so a technical committee controls new numbers being added, descriptions changing etc.

    I thought however that its the credit card processing firm that assigns the MCC to the merchant not the networks themselves... with SquareUp (https://squareup.com/help/gb/en/article/5444-choose-a-business-type-for-your-square-account) the merchant can choose their own MCC even.
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