Do credit card issuers prohibit buying lottery tickets?
No, most credit card issuers don't usually have specific rules against buying lottery tickets with your credit cards. That said, they don't exactly encourage it, either.
Basically, any transaction that could be easily converted into cash is considered to be a type of cash advance. This includes cryptocurrency, money orders, and yes, lottery tickets. In the eyes of the credit card issuer, buying a lottery ticket with a credit card is the same as using your card to pull cash out of an ATM.
Drawbacks of cash advances for lottery tickets
Since these transactions are designated as cash advances in most cases, there are a lot of drawbacks:
- They start accruing interest right away. There's no grace period on cash advances, so you'll start accruing interest fees as soon as the transaction hits your account.
- They have higher APRs. In addition to earning interest right away, most cards charge a higher interest rate for cash advances than they do for purchases.
- There's a cash advance fee. The majority of cards charge a transaction fee for cash advances. These fees can range from 3% up to 5% of the total transaction amount.
- Cash advances don't earn purchase rewards. Few, if any, credit cards allow you to earn purchase rewards on cash advances. They won't count toward your sign-up bonus requirements, either.
Can you avoid cash advance fees for lottery tickets?
The obvious way to avoid these fees is to use cash. However, if you really want to use a card, you may be able to do so without paying cash advance fees, but it requires an extra step.
In some cases, you may be able to use your credit card to buy a gift card without triggering the cash advance fees. You could then try to use the gift card to buy a lottery ticket.
However, a few card issuers will count gift card purchases as cash advances. Additionally, some states and retailers may not allow you to use gift cards to buy lottery tickets. Do your homework before trying this particular workaround.
Should you use a credit card to buy lottery tickets?
There aren't many good reasons to use a credit card to buy lottery tickets -- and a lot of reasons not to do it. When all is said and done, this is one case where it's always better to use cash instead of a credit card.
You won't earn rewards
One of the main reasons people may want to buy lottery tickets with a credit card is to earn rewards on the purchase. Unfortunately, as mentioned above, lottery purchases are usually considered cash advances. This means they won't usually earn purchase rewards. Cash advances also don't count toward the spending requirement for a sign-up bonus.
You're taking on debt to gamble, which is a risk
There's no such thing as a guaranteed win when it comes to lottery tickets. Your credit card is a line of credit -- which means it's a form of debt. Taking on debt to finance any type of gambling is just asking for trouble.
What's more, credit card debt is one of the most expensive forms of debt. Credit cards have very high interest rates. There are some occasions when you can get a reduced interest rate -- such as with an intro APR offer -- but cash advances aren't included in these offers.
In other words, lottery ticket purchases on a credit card are a debt trifecta. You'll have the cash advance fee, interest that starts accruing right away, and a high interest rate. This can quickly turn even a modest lottery purchase into a very expensive debt.
