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Why states like S. Carolina, New Jersey and Iowa ban lottery ticket purchases with credit cards

Between the Mega Millions and Powerball jackpots, there’s a combined $2.2 billion up for grabs. If you win, here’s some things you must have! Reviewed.com

epa07103113 A woman holds Mega Millions lottery tickets she just bought from a machine in Washington, DC, USA, 18 October 2018. Mega Millions, a 44-state lottery, has a record jackpot of nearly one billion US dollars. Friday’s Mega Millions drawing will be the second largest lottery jackpot in US history. EPA-EFE/MICHAEL REYNOLDS ORG XMIT: MRX04 (Photo: MICHAEL REYNOLDS, EPA-EFE)

Many Americans who hoped to fund their dream of winning the $1.537 billion Mega Millions jackpot by buying a 6-number lottery ticket with their credit card had to pay with cash instead.

And that includes the unidentified newly minted mega-millionaire from South Carolina who held the single winning ticket in this week’s drawing.

The reason: buying lottery tickets using plastic – the go-to form of payment for most Americans – is banned by roughly two dozen U.S. states, according to an analysis from CreditCards.com.

The rules and laws pertaining to lotteries are determined at the state level. And 23 states plus Washington, D.C., forbid the use of credit cards, says Ted Rossman, industry analyst at CreditCards.com.

Adding to the confusion, he says, is that 10 states – including Indiana, Maine and New York – leave the decision up to the retail outlets or stores that sell lottery tickets to millionaire hopefuls.

The main reason some states prohibit lottery players from using their credit cards is they fear some people could get themselves into financial trouble by gambling on the lottery with money they may not have, Rossman explains.

Lawmakers in these states are trying to minimize the risk of Americans running up credit card debt and paying exorbitant interest rates if they carry a balance at the end of the month. The bans are also a way to minimize the number of people that develop gambling addictions.

“States don’t want consumers to rack up credit card debt buying lottery tickets, especially when the odds of winning the Mega Millions jackpot is slim to none,” says Kimberly Palmer, credit card expert at NerdWallet, a personal finance site. “In California, lotto tickets have a disclaimer at the top that says, ‘Remember, keep it fun. Play responsibly,’ which is something that all consumers should keep top of mind.”

Playing the lottery is a vice for many Americans, with the most frequent players and biggest spenders coming from U.S. households in the lowest income brackets, a Bankrate.com survey found. Twenty-eight percent of U.S. households with annual incomes below $30,000 play the lottery at least once a week, versus just 18 percent of American households that earn $75,000 or more.

Financially strapped households, the Bankrate survey found, spend $412 per year, on average, on lottery tickets – nearly four times the amount that the highest-earning households admit to spending.

An American with low income and a low credit score could pay as much as 25 percent in interest on a credit card, says Rossman. And if that person carried that $412 lottery ticket balance for a full year, he or she would pay more than $100 in interest.

“Unless you are someone that makes an occasional purchase of lottery tickets with a credit card that you pay off at the end month, it’s a bad idea to pay for your lottery tickets with plastic,” says Rossman.

The winning Mega Millions ticket was purchased with cash in South Carolina, one of nearly two dozen states that ban credit card purchases of tickets.

Buying a Powerball ticket? You will likely need cash

A clerk hands a patron his $10 worth of chances for the upcoming Powerball drawing on Saturday, Jan. 9, 2016, in Cranberry Township, Pa. The Powerball jackpot has reached a record $1.5 billion, with the drawing Wednesday night.

(Keith Srakocic/The Associated Press)

If you’re looking to use your credit cards to buy tickets for tonight’s $1.5 billion Powerball drawing, think again. Most of the 44 states that participate in Powerball don’t allow buyers to use credit cards to purchase their tickets.

According to Creditcards.com, 17 of the 44 states that allow Powerball permit credit card purchases. The others require cash but do allow, in some cases, purchases via debit cards or gift cards. Some states that do allow for credit card purchases leave it up to the retailer if they want to accept them.

Experts said allowing lottery purchases via credit card is a bad idea.

“If you don’t have enough cash to buy a lottery ticket, you shouldn’t be paying with a credit card,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling. “Irresponsible use of credit can lead to unmanageable debt and the serious consequences that follow. Whether it is fueled by gambling or other factors, overspending is a serious problem that deserves immediate attention.”

There’s nothing to stop someone from using their credit card to get a cash advance to go towards lottery tickets but McClary said that’s another dangerous endeavor.

“If a machine doesn’t accept credit cards, their next instinct might be to go to an ATM and get a cash advance with their credit card,” McClary said. “Because of the high APRs typically associated with credit card cash advance transactions, you are actually ending up costing yourself more by doing that. It’s a very dangerous move to consider getting a cash advance to pay for a lottery ticket.”

States surrounding Alabama

Since Alabama doesn’t have a lottery, people here have been going to Florida, Georgia and Tennessee to purchase their tickets ahead of tonight’s drawing. Tennessee requires cash for lottery ticket purchases. Georgia lottery allows for buyers to use debit cards and even offers an iHope pre-paid debit card. The card allows players to preload funds, buy tickets and have their winnings automatically loaded onto the card’s account.

Florida’s lottery also prohibits the use of credit cards to buy tickets. Retailers can opt to accept debit cards, however.

Florida’s legislature is currently considering a bill that would allow lottery tickets to be sold anywhere you can swipe a credit card, including gas pumps and ATMs.

Buying a Powerball ticket? You will likely need cash A clerk hands a patron his $10 worth of chances for the upcoming Powerball drawing on Saturday, Jan. 9, 2016, in Cranberry Township, Pa. The ]]>