Regardless of whether a state allows credit card funding for online gaming accounts, DraftKings will soon stop allowing its online sportsbook and iGaming customers to make deposits using credit cards.

Customers who play online games at DraftKings received a notice on Thursday that credit card use will be prohibited starting on Monday, August 25.  Although they frequently impose significant fees and high interest rates on cash advances, many credit cards permit transactions linked to legitimate online sports betting and iCasino sites.

"DraftKings has made the strategic business decision to remove credit cards as a deposit option for sportsbook and casino in the United States. The change is intended to help customers avoid cash advance fees and higher interest rates often associated with this payment method and otherwise improve the deposit experience,” the DraftKings notice read.

According to DraftKings, effective Monday, all user credit card information that is kept on file will be disabled.  Debit cards, wire transfers and bank transfers (ACH), Apple Pay, PayPal, Venmo (with an approved payment method), gift cards, or cash deposits at a DraftKings retail sportsbook are the only ways consumers can make deposits in the future.

Massachusetts Penalty

Internet sports betting is regulated in 36 states and Washington, DC, but only seven jurisdictions allow internet casinos.  Even though physical casinos have always relied on cash, the rise of legal internet gaming has brought credit cards to the market.

Credit card deposits are accepted in a number of jurisdictions where online sports betting is legal, including the biggest markets, New York, New Jersey, Nevada, and Pennsylvania.  Massachusetts, where DraftKings is based, is one of the eight states that don't.

The Massachusetts Gaming Commission (MGC) penalized DraftKings $450,000 earlier this month for permitting certain players to utilize credit cards to make deposits.  At least 218 DraftKings Sportsbook accounts made 242 credit card deposits totaling nearly $84K, according to the state gambling regulator.

In addition to the $450,000 fine, DraftKings was mandated to reimburse the bettors who made the $83,667.92 credit deposits.

Credit cards are also not accepted at sportsbooks in Connecticut, Illinois, Iowa, New Hampshire, Oregon, Rhode Island, Tennessee, and Vermont. 

Advances in Cash 

Credit card issuers do not view gambling-related transactions as typical purchases, but rather as cash advances.

"Credit card companies charge a cash advance fee when you use your card’s line of credit to get access to cash. Because card issuers tack on fees and high interest rates to these transactions, cash advances are an expensive way to get extra cash,” explains Jennifer Brozic of Experian.

According to Brozic, these transactions normally do not have the same interest-free grace period as purchases, in addition to a cash advance cost that commonly falls between 3% and 5%.  Interest can therefore begin to accrue right away.

For instance, someone uses a credit card to obtain a $1,000 cash advance.  $50 is paid by the client (5%).  The interest at 29.99% would be $93.73 if they took six months to repay the advance.  This makes the $1,000 advance's total cost $1,143.72.  Interest can mount up considerably for debtors who take longer to repay the loan.