Credit cards have become a ubiquitous tool for consumers to make purchases, with many people relying on them for everyday transactions. However, not all credit card transactions are created equal, and some can be more costly than others. One type of transaction that many people may not be aware of is a quasi-cash transaction.
Understanding quasi cash transactions is important for anyone who uses credit cards, as it can help them avoid unnecessary fees and charges. By knowing what types of transactions are considered quasi-cash, consumers can make more informed decisions about how they use their credit cards and avoid any unexpected costs.
What is Quasi Cash Transaction?
A quasi-cash transaction is a type of transaction carried out using a payment card, where the person making the payment does not receive a specific good or service, but a substitute for money (a substitute, not fully recognized as a means of payment), which can only be used in a specific place and can be used again exchange for cash.
This can include things like purchasing casino chips or lottery tickets, or even transferring money between different accounts. While these transactions may seem innocuous, they can come with high fees and interest rates, making them an expensive way to use credit.
A quasi-cash transaction is a type of transaction that involves the purchase of items that can be easily and routinely converted into cash. These items include foreign currencies, money orders, lottery tickets, travelers’ checks, and casino chips, among others. Quasi-cash transactions are often treated as cash advances by credit card companies and can come with higher fees and interest rates.
Types of Quasi-Cash Transactions
Credit card quasi-cash transactions are non-cash transactions that can be converted into cash and are considered high-risk by credit card companies. These transactions are subject to higher fees and interest rates than regular purchases. Here are some common types of quasi-cash transactions:
Money Orders and Wire Transfers
Money orders and wire transfers are considered quasi-cash transactions because they can be easily converted into cash. Money orders are prepaid instruments that can be used to make payments or send money to other people. Wire transfers, on the other hand, are electronic transfers of money between two parties. These transactions are often used for large payments or to send money overseas.
Casino and Gaming Activities
Casino and gaming activities are also considered quasi-cash transactions. This includes purchasing casino chips or gaming tokens with a credit card. These transactions are often used by people who want to gamble but do not have cash on hand. Online gambling is also considered a quasi-cash transaction.
Foreign Currency and Cryptocurrency Transactions
Foreign currency and cryptocurrency transactions are also quasi-cash transactions. These transactions involve exchanging one currency for another or buying and selling cryptocurrencies. These transactions are often used by people who travel frequently or invest in cryptocurrencies.
Digital Transactions
Digital transactions are also considered quasi-cash transactions. This includes using digital payment apps like PayPal or Venmo to make purchases or send money to other people. These transactions are becoming increasingly popular as more people use digital payment apps to make purchases.
Overall, credit card quasi-cash transactions can be risky for both the credit card company and the cardholder. It is important to understand the risks and fees associated with these transactions before using a credit card for quasi-cash transactions.
Fees and Interest Rates
These transactions typically come with fees and interest rates that are different from regular purchases. In general, cash-like transactions have a fee of $10 or 3% to 5%, whichever is greater. Some credit cards may also charge a higher interest rate on cash advances compared to regular purchases. It is important to read the terms and conditions of a credit card agreement to understand the exact fees and interest rates that apply to quasi-cash transactions.
Credit card processing fees are typically charged by the merchant’s bank and range between 1.5% and 3.5% of the transaction amount. The fees may vary depending on the type of card used and the processing method. Some merchants may pass on the processing fees to the customer by adding a surcharge to the transaction amount. However, some states have laws that prohibit merchants from charging a surcharge on credit card transactions.
Banks may also charge a fee for balance transfers, which is the process of transferring debt from one credit card to another. The fee is usually a percentage of the amount transferred and may range from 3% to 5%. It is important to compare the fees and interest rates of different credit cards before choosing one for a balance transfer.
In addition to fees and interest rates, credit card users should also be aware of the impact of cash-like transactions on their credit score. Cash advances may be considered a high-risk form of borrowing and may negatively affect credit scores if not paid back on time. It is important to use cash-like transactions only when necessary and to pay them back as soon as possible to avoid incurring high fees and interest charges.
Quasi-cash MCC Codes
Merchant Category Codes (MCCs) are used by credit card companies to categorize the types of goods or services that a business offers. These transactions are based primarily on MCCs, and they refer to transactions that are similar to cash advances. These transactions are typically charged at a higher interest rate and may incur additional fees.
Some common MCCs associated with quasi-cash transactions include:
- 7802 – Government-licensed horse/dog racing
- 7995 – Betting, including lottery tickets, casino gambling chips, off-track betting, and wagers at race tracks
- 4829 – Money order / wire transfer
- 6050 – Quasi-cash, such as Western Union
- 6051 – Non-financial institutions
- 7511 – betting (including lotteries), casino chips
- 7801 – Government Licensed Casinos (Online)
- 7802 – Government licensed horse/dog racing
- 7995 – Bookmaker bets
Merchants that present a financial risk to the payment processor are assigned a high-risk MCC. Receiving a high-risk MCC leads to higher fees and limitations on merchant accounts. It is important to note that not all transactions associated with these MCCs are considered quasi-cash transactions. For example, a purchase of lottery tickets may not be considered a quasi-cash transaction if it is made at a grocery store.
Credit card companies may also place restrictions on certain MCCs. For example, Visa introduced MCCs 7800, 7801, and 7802 in 2015 for facilitate legal gambling transactions in the U.S. for those gambling merchants registered and verified by Visa, including card-not-present (CNP) gambling transactions. Similarly, Mastercard has specific MCCs for cruise lines and boat rentals.
In summary, quasi-cash MCC codes are used to categorize transactions that are similar to cash advances. Merchants with high-risk MCCs may face higher fees and limitations on their merchant accounts. Credit card companies may also place restrictions on certain MCCs.
Potential Benefits and Drawbacks
Credit card quasi-cash transactions come with a range of potential benefits and drawbacks that consumers should consider before engaging in them.
Benefits
- Rewards: One of the most significant benefits is the potential to earn rewards. Some of the credit card issuers offer cashback, points, or miles for purchases made using their cards be aware, that some issuers exclude such transactions from rewards programs). By using a credit card for quasi-cash transactions, consumers can earn rewards on purchases that they may not have been able to earn rewards on otherwise.
- Convenience: transactions can be convenient, as consumers can use their credit cards to make purchases without having to carry cash. This can be particularly useful for larger purchases, such as airline tickets or hotel reservations, where carrying large amounts of cash may not be practical or safe.
- Security: Credit card transactions are generally more secure than cash transactions, as credit cards offer fraud protection and the ability to dispute charges. This can give consumers peace of mind when making purchases, knowing that they will not be held liable for fraudulent transactions.
Drawbacks
- Fees: Credit card issuers may charge fees, such as cash advance fees. These fees can be significant and can quickly eat into any rewards earned on the transaction.
- Interest: transactions may also be subject to higher interest rates than other types of transactions. This means that consumers could end up paying more in interest charges if they do not pay off the balance in full each month.
- Credit Score: Using credit cards for quasi-cash transactions could potentially harm a consumer’s credit score, as high balances and utilization rates can negatively impact credit scores.
Overall, these transactions can be a useful tool for consumers, but they come with potential benefits and drawbacks that should be carefully considered before engaging in them.
Conclusion
Credit card quasi-cash transactions are a type of transaction that is often overlooked but can have significant consequences for cardholders. Quasi-cash transactions are those that involve the purchase of items that are easily converted into cash, such as money orders, gaming chips, and foreign cash.
While these transactions may seem harmless, they often come with high fees and interest rates that can quickly add up. It is important for cardholders to be aware of the fees associated with quasi-cash transactions and to avoid making these types of purchases whenever possible.
In addition, some credit card companies have recently updated their policies to include new restrictions on quasi-cash transactions. For example, Chase Bank has implemented a new policy that defines cash-like transactions and limits the rewards points that can be earned on these types of purchases.
Overall, it is important for cardholders to stay informed about the latest policies and fees associated with quasi-cash transactions to avoid unnecessary fees and charges. By being aware of these potential pitfalls, cardholders can make informed decisions about their credit card usage and avoid unnecessary financial stress.
What is a quasi-cash fee on a credit card?
A quasi-cash fee is a charge that some credit card companies impose on transactions that are not considered to be traditional purchases. These fees are usually a percentage of the transaction amount and can range from 1% to 5%.
What are some examples of quasi-cash transactions?
Quasi-cash transactions include purchases of items that can be easily converted to cash, such as money orders, casino chips, lottery tickets, and traveler’s checks. They may also include purchases of foreign currency or cryptocurrency.
How are quasi-cash transactions different from regular credit card transactions?
Regular credit card transactions involve the purchase of goods or services from a merchant. Quasi-cash transactions, on the other hand, involve the purchase of items that can be easily converted to cash.
Do all credit cards charge a fee for quasi-cash transactions?
No, not all credit cards charge a fee for quasi-cash transactions. However, it is important to check the terms and conditions of your credit card to see if such fees apply.
Are there any benefits to making quasi-cash transactions on a credit card?
One benefit of making quasi-cash transactions on a credit card is that it can help you earn rewards points or cash back. However, it is important to weigh the potential rewards against the fees that may be charged.
How can I avoid paying fees for quasi-cash transactions on my credit card?
One way to avoid paying fees for such transactions is to use a credit card that does not charge such fees. Another way is to avoid making quasi-cash transactions altogether and instead use your credit card for traditional purchases.
Are there any restrictions on credit card quasi-cash transactions?
The terms and conditions of your credit card may vary, but there are typically restrictions in place for credit card quasi-cash transactions. For example, there may be limits on the amount you can withdraw as cash or the total number of quasi-cash transactions you can make within a certain period.
How does a credit card recognize quasi-cash transactions?
The recognition of credit card quasi-cash transactions may vary depending on the merchant and the financial institution. In some cases, the transaction may be coded as a cash advance or as a separate category specifically for quasi-cash transactions.
How can I avoid credit card scams related to quasi-cash transactions?
To minimize the risk of credit card scams, it’s important to only use your credit card for quasi-cash transactions at reputable merchants and financial institutions. It’s also essential to regularly review your credit card statements and report any unauthorized transactions to your credit card company.
Does the use of a credit card for quasi-cash transactions affect my credit score?
The use of a credit card for quasi-cash transactions can impact your credit score, particularly if you fail to make timely payments on the cash advance amount or exceed your credit limit. It is important to manage your credit card debt responsibly to maintain a healthy credit score.
