Would a Credit Card Ban Help Solve Problem Gambling?

New Zealand is the latest country to consider banning credit cards for online gambling deposits. But would a ban help solve the problem gambling issue?

It was reported earlier this week that New Zealand´s gambling regulator – the Department of Internal Affairs – is looking to ban credit cards for online gambling transactions “to minimize harm”. The news came as a bit of a surprise to industry observers because research into problem gambling in New Zealand (PDF) suggests there isn´t much harm to minimize.

Although the research dates back a few years to when fewer opportunities existed to gamble online (i.e. via a smartphone app), problem gambling rates in New Zealand are among the lowest in the world. Using the Problem Gambling Severity Index (PGSI) scale as a benchmark, New Zealand´s gamblers score just 0.4% compared to 0.6% in neighbouring Australia, 0.7% in the UK, 2% in Canada, and 3.2% in South Africa. Gamblers in the US score between 0.5% (Michigan) and 3.9% (Mississippi) depending on location.

SkyCity Online the Trigger for Concerns

As a rule of thumb, for each pathological gambler (those who score highest on the PGSI scale) there are eight “at risk” gamblers; and what´s triggered the Department of Internal Affairs´ concerns about credit card deposits is the forthcoming launch of SkyCity Online.

SkyCity is the country´s biggest brick and mortar casino operator. It is due to launch its online gambling platform later this year, but from Malta – where player protection, responsible gambling measures, and anti-money laundering regulations are much laxer than they are in New Zealand.

Tracey Martin – New Zealand´s Minister of Internal Affairs – is worried that New Zealand´s gamblers will be attracted to SkyCity Online without understanding they are not protected by New Zealand law. She fears that the lax controls applied in Malta could result in “at risk” gamblers developing into pathological gamblers and believes a ban on credit card deposits could prevent this.

New Zealand Not the First to Consider a Credit Card Ban

The concept of implementing a ban on credit card deposits is not new. Many government organizations have discussed the option, including the UK´s Gambling Commission (UKGC). The UKGC launched an investigation into the harm caused by betting on credit after a Citizen´s Advice survey (PDF) revealed 49 percent of problem gamblers use a credit card to fund their addictions. The UKGC is considering either enforcing a limit on credit card deposits or banning them altogether after one gambler used nine different credit cards to run up a debt of £100,000 in two days.

In principle, credit card bans already exist in countries such as Russia, Brazil, and Japan – where banks are supposed to block credit card payments to gambling operators. In South Africa – the country with the highest percentage of pathological gamblers in the world – it is illegal to fund an offshore gambling account with a South African-issued credit card, but not to fund a domestic gambling account. However, this has more to do with Exchange Control Regulations than helping problem gamblers.

Some financial institutions have taken it upon themselves to prohibit credit card deposits. In the USA, American Express, Wells Fargo, and J.P. Morgan Chase are among several credit card providers refusing to process deposits for online gambling sites, whether the sites are regulated or not. And whereas a number of banks in Europe only offer voluntary customer-initiated gambling controls, they do periodically step in and protect their customers´ interests by declining online gambling transactions.

The Advantages and Disadvantages of Credit Card Deposits

The popularity of using a credit card to fund an online gambling account can be attributed to several factors. Historically, for players in the U.S., credits cards were one of only a few options many players had in the post-UIGEA period when eWallet companies such as Neteller stopped supporting gambling transactions in the U.S. A similar scenario exists in many other “grey market” jurisdictions.

Credit card deposits are undoubtedly convenient. They often have lower minimum and higher maximum deposit thresholds than other deposit options; and, in most cases, online gambling sites do not charge fees for processing credit card deposits. Furthermore, credit card deposits are secure inasmuch as the cards have safety features to prevent fraudulent use; and if the card is used fraudulently by an online operator, the credit card provider will cover any amount stolen from the player.

Their convenience is also one of their disadvantages. Problem gamblers find it easy to chase losses with money they don´t have with the click of a mouse. Other disadvantages include the costs of gambling on credit. Although online operators may not charge a deposit processing fee, credit card issuers often consider credit card deposits as cash advances; and, not only apply their own fees, but also charge a higher rate of interest on the transaction – pushing problem gamblers deeper into debt.

So, Would a Ban on Credit Card Deposits Work?

There has not yet been enough research done to tell whether a blanket ban on credit card deposits would be effective. Allegorically, once a pathological gambler´s credit card is maxed out, he or she will find other ways to fund their online gambling activities, so a ban would not necessarily be effective – just inconvenient. However, if the lack of convenience prevents an at risk gambler developing into a pathological gambler, a ban would be justified.

In conclusion, the jury is still out on whether a ban on credit card deposits at online gambling sites would be a good thing or a bad thing. If you have a view on this subject, let us know in the comments box below.