Fears over cash withdrawal costs

Website Uswitch found that the way interest rates are calculated means the full cost of withdrawing cash can be much higher than the advertised rate.

It also found that in less than two years, cash rates increased by 30% from an average of 20.8% APR to 27.1% APR.

The industry says the amount of cash taken out on a credit card is falling.

'Last resort'

Uswitch says the interest rate for shopping using a credit card should give a fair impression of the overall cost of borrowing.

However, when credit card holders withdraw cash, the interest rate does not take withdrawal fees into account, and may not factor in compound interest, the company adds.

The research also suggests that the rate of interest on cash withdrawals is increasing faster than on purchases.

Nick White, financial services director for the price comparison website, advised people to use the cash withdrawal facility on their credit cards only as a last resort.

He said: "The reality is that most people who use this facility are either unaware of the actual costs incurred, or are so desperate to get their hands on the cash that they don't care how much it will cost them."