Over the last 12 months many larger banks have indicated that they have experienced defaults or ‘bad loans’ as part of the credit card side of their business. When a bank raises the interest rate of a particular product, it is in direct relation to the risk associated. For example, a loan product targeted to a large business with many assets and an excellent credit history will carry significantly less risk and therefore less interest than an unsecured credit card to an individual.
Recently HSBC denied that customers who use their credit cards to gamble online or at high-street betting shops are more likely to accrue big debts and default.
A HSBC spokesperson said "We have not seen that as part of our customers' behavior"
HSBC has however, made a decision to charge more for gambling transactions processed on its credit cards. Other Banks currently charge higher rates for online gambling transactions. As of next month, HSBC customers will be charged a cash advance rate instead of the normal purchase rate when making online gambling transactions. This applies to HSBC customers who make all internet and telephone bets. In the UK it is still illegal to use a credit card in a casino. The UK betting industry has a general policy of not accepting credit cards for wagers in bookmaking shops. Industry annalists see the upped interest rate due to the higher rate of fraudulent gaming transactions.
A loophole that HSBC customers may use to avoid the higher rate is using a stored value account such as Paypal. HSBC said that no bank could tell what the ultimate destination of any Paypal transaction might be.
