Basically, any transaction that can be easily converted into cash is considered 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 like using your card to withdraw money from an ATM.
Related: How credit card cash advances work
Since these transactions are referred to as cash advances in most cases, there are a lot of downsides:
- They immediately start accumulating interest. There is no grace period on cash advances, so you’ll start earning interest charges as soon as the transaction hits your account.
- They have higher APRs. In addition to earning interest immediately, most cards charge a higher interest rate for cash advances than for purchases.
- There are cash advance fees. Most cards charge transaction fees for cash advances. These fees can range from 3% to 5% of the total transaction amount.
- Cash advances are not eligible for purchase rewards. Few, if any, credit cards allow you to earn shopping rewards on cash advances. They will also not count towards your sign-up bonus requirements.
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 a cash advance fee, but it requires an extra step.
In some cases, you may be able to use your credit card to purchase a gift card without triggering the cash advance fee. You can then try to use the gift card to purchase a lottery ticket.
However, a few card issuers will treat gift card purchases as cash advances. Also, some states and retailers may not allow you to use gift cards to purchase lottery tickets. Do your homework before trying this particular workaround.
Do I have to use a credit card to buy lottery tickets?
There aren’t many good reasons to use a credit card to buy lottery tickets – and plenty of reasons do not to do it. Ultimately, this is a case where it’s always better to use cash instead of a credit card.
Related: Cash vs credit cards
You will not 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 generally considered cash advances. This means that they generally won’t earn purchase rewards. Cash advances also do not count toward the required spend for a sign-up bonus.
Related: How credit card points work
You go into debt to gamble, which is a risk
There is no guaranteed win when it comes to lottery tickets. Your credit card is a line of credit, which means it’s a form of debt. Going into debt to fund any type of game is just asking for trouble.
Additionally, credit card debt is one of the costliest forms of debt. Credit cards have very high interest rates. There are occasions where you can get a reduced interest rate – such as with an introductory APR offer – but cash advances are not included in these offers.
Learn more: How credit card interest works
In other words, lottery ticket purchases with a credit card are a trifecta. You’ll have cash advance fees, interest that starts accumulating immediately, and a high interest rate. This can quickly turn even a modest lottery purchase into very costly debt.
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