CFPB Sounds Alarm on Legal Sports Betting Credit Card Fees

• A new CFPB report reveals that credit card issuers often categorize sportsbook transactions as cash advances, leading to surprise fees of up to $10 per transaction and interest rates of 30% starting immediately.
• Bettors are urged to consider alternative payment methods, as the CFPB calls for clearer disclosures and state regulations to prevent hidden costs associated with credit card-funded sports betting deposits.

NEW YORK – There is no doubt the legalization of sports betting has fueled a boom with an estimated $125 billion wagered this year when 2024 ends. However, for consumers funding their bets with credit cards, the cost may be higher than anticipated.

According to a new report from the Consumer Financial Protection Bureau (CFPB), credit card issuers are categorizing most sportsbook transactions as “cash advances,” triggering significant fees as well as interest charges.

This practice has left some sports bettors shocked by unexpected costs, with fees as high as $10 per transaction and interest rates of up to 30% accruing immediately.

The Rise in Cash Advance Fees

The CFPB’s analysis, focusing on Kansas and Ohio, shows a sharp increase in cash advance fee incidence following the legalization of sports betting in these states.

• Kansas: In September 2022, the first month of legal sports betting, 8,000 more accounts incurred cash advance fees compared to the previous month.
• Ohio: After sports betting launched in January 2023, cash advance fees surged by over $1 million.

These spikes suggest that many bettors are caught off guard by the financial consequences of using credit cards for sports betting.

How Cash Advance Fees Add Up

Cash advances typically incur a flat fee based or it is based on a percentage stipulated by the credit card company—whichever is higher. For smaller bets, the cost can be disproportionately high.

A $20 wager could result in a $10 fee—50% of the deposit amount. Interest begins accruing immediately at rates averaging 30%, with no grace period. For example, a $400 credit card-funded deposit could rack up $30 in fees and interest within a single month.

Lack of Transparency Leaves Bettors Uninformed

A significant issue highlighted by the CFPB is the lack of transparency from both legal sportsbooks and credit card issuers. Many sportsbooks accept credit cards but fail to clearly warn consumers about potential fees. Similarly, credit card agreements often bury details about cash advance charges in fine print.

Bettors have expressed frustration, with one calling the charges “sneaky” and another warning others about the lack of upfront disclosure.

To steer clear of these fees, consider alternative payment methods:

• Bank Transfers: Directly link your bank account to the sportsbook.
• Banking Apps: Services like PayPal, Venmo, or Zelle are often fee-free.
• Cryptocurrency: Many sportsbooks accept Bitcoin and other cryptos, which can offer lower costs.

Additionally, check with your sportsbook and credit card issuer about their policies before making a real money sportsbook deposit.

Regulatory Attention Needed

The CFPB has called for state gaming regulators to address the issue, suggesting limits on credit card use for sports betting. Some states with legal sports betting, including Iowa and Tennessee, already prohibit credit card funding for online wagers. The Massachusetts Gaming Commission even went so far as issuing a fine to DraftKings for allowing bettors to use a credit card.

As sports betting continues to grow, the CFPB’s findings highlight the need for clearer disclosures and consumer protections to ensure that bettors aren’t blindsided by hidden costs.

• Bottom Line: Before placing your next bet, review your funding options carefully. Credit cards may seem convenient, but the hidden costs could take a significant bite out of your winnings—or worse, leave you in debt.

News tags: Consumer Financial Protection Bureau | credit card sports betting | Credit Cards | DraftKings | Iowa | Kansas | Massachusetts | Ohio | Tennessee