Higher Credit Card Processing Rates in Store for UK Online Gamblers

London-based banks Royal Bank of Scotland (RBS) and Egg have revealed plans to begin treating consumer transactions that are used to pay for gambling services as cash advances, rather than as purchases of traditional goods and services. In doing so, the banks will subject gambling transactions to higher interest rates. The policy changes from two of England's most prominent credit banks are likely an indicator of things to come across the entire credit and banking industry.

Gambling transactions will be classified as cash advances because when customers fund online gambling accounts, all they are doing is using their lines of credit to access cash, albeit in the form of virtual chips. The new policy recognizes such transactions as similar to the withdrawal of money from a cash machine and, therefore, subjects them to the same higher rates.

"The step that has been taken by RBS is part of a move taking place across the credit card industry to examine the type of transactions people are making on their accounts," stated a spokesperson for RBS's Mint brand. "The gambling transactions are to be treated as 'advances,' as this is felt to be a more accurate means of reflecting that a gambling transaction is effectively a cash equivalent exchange."

At the moment, Mint applies the same 14.9 percent interest rate to gambling transactions as it does to traditional purchases, but after May 1, gambling transaction will incur a 17.9 percent interest rate. Mint customers will also incur the cash advance interest rate on the purchases of food and drink in casinos.

Internet bank Egg will institute its new policy on April 1. In addition to applying its 20.9 percent cash advance rate to gambling transactions, Egg will also charge a 2.5 percent fee. Its standard rate for traditional purchases is 15.9 percent.

"The recent explosive growth of online gambling and gambling in casinos has meant that consumers now demand different ways of funding this type of leisure activity," stated a spokesperson for Egg, which is part of Prudential. "As such, many credit card providers now allow consumers to use their cards to advance them cash for gambling, typically in the form of chips or 'virtual' chips. Our decision to levy a fee on such transactions is simply bringing gambling into line with traditional forms of cash advances, such as obtaining money from an ATM machine, or the purchase of foreign currency, travelers' checks or postal orders."

According to The Times of London, banking industry insiders expect the application of cash advance rates to gambling transactions to be common practice by the end of they year.

Online payment solutions companies such as NETeller, FireOne and Citadel already process a large number of online gambling transactions for British customers and could inherit even more business if credit card customers are unwilling to accept the increased credit card rates.

Shaking the payment processing picture for online gambling up even further is the return of PayPal onto the scene. At the end of February, the eBay-owned company's European division began permitting customers of betting exchange network Betfair to deposit and withdraw funds via its service. This week PayPal Europe announced that Ladbrokes customers can also now use its services.

Paypal Europe is apparently open to the idea of permitting even more online gambling companies to use its services, but it does have strict requirements. Any online betting company wishing to utilize PayPal must demonstrate that it can block U.S. residents from using Paypal to fund online gambling accounts in addition to meeting anti-money laundering and age verification requirements.