Why You Should Never Use Credit Cards To Buy Your Ticket

The Powerball lottery jackpot has grown to a dizzying $1.7 billion, and you may well be tempted to jump in ahead of Saturday’s drawing. Putting aside the minuscule odds of winning—1 in 292 million, by the way—if you want a chance at Powerball’s third-largest jackpot ever, there’s one thing you should know: It’s best to avoid using your credit card.

Credit issuers treat buying lottery tickets and other gambling-type purchases as if they’re cash advances, the same as when you withdraw money from an ATM or bank with your credit card. 

Cash advances come with much harsher terms than normal purchases. First, there’s a cash advance fee, which can be a percentage of the total (typically 3% to 5%) or a flat charge (often $5 to $10). If it’s the latter, the cash advance fee is likely more than the $2 Powerball ticket by itself.

Cash advances also begin accruing interest immediately, unlike traditional credit purchases, which have a grace period for you to pay down the balance.

Playing the Lottery Numbers

Anyone who knows the odds can tell you that buying lotto tickets is a bad bet, but that didn’t stop Americans from spending more than $113.3 billion on state-run lotteries last year, according to the North American Association of State and Provincial Lotteries.

That spending was higher among individuals with lower incomes. People with household income under $50,000 spend about 30% more on the lottery than those making more than $100,000, according to a study by Wharton economist Benjamin Lockwood.

Lockwood and his co-authors found that low financial literacy, a lack of statistical knowledge, and struggles with self-control all play a role. They estimate that if every American had the financial knowledge and self-control of their highest-scoring survey respondents, lottery spending would drop 43%.

“People aren’t the rational actors that come out of an Econ 101 textbook,” Lockwood said in a Wharton publication last month. “They sometimes make mistakes, are subject to temptation, or don’t totally understand something.”

The Bottom Line

On Saturday, Powerball will draw six numbers and potentially award a $1.7 billion jackpot. If you want a shot at the money, don’t make your odds worse by buying a ticket with a credit card. That’s because card issuers treat buying lottery tickets like taking out cash advances, which come with up-front fees and immediate interest.