Are cash withdrawals bad for your credit rating?

lisyloo

I have picked up on here some people saying that cash withdrawals on credit cards could be bad for your credit rating.
I would like to check this as I know not everything you pick up turns out to be correct.

I have read Martins article and see no warning about this.

I have a good credit history and good income.
I have 7 open credit accounts and 16 closed credit accounts all without any late payments, so plenty of history.

I have taken out the Clarity card to get cash abroad which I can pay back straight away.

Should I be worried or have I picked up bad information.
Where will I see on my credit report this information?

P.S. I ahve checked the forums and Martins articles before posting so I have been a good girl :A

DrScotsman

1. Cash advances will probably be considered for your internal rating with that company

2. I might be mistaken, but I believe one of the changes made to credit reports recently (when they started to store a few new pieces of info) is cash advance info is now given to the credit agencies. On an Equifax report I got back in March I have spaces for "Cash Advance Amount" and "Number of Cash Advances During Month" for my credit cards.

Whether it actually counts as bad or not is another matter...one which I shall leave for the next poster

YorkshireBoy

DrScotsman wrote: »

2. I might be mistaken, but I believe one of the changes made to credit reports recently (when they started to store a few new pieces of info) is cash advance info is now given to the credit agencies. On an Equifax report I got back in March I have spaces for "Cash Advance Amount" and "Number of Cash Advances During Month" for my credit cards.

Halifax are reporting my card (not Clarity but would assume it's the same) in the new format to Experian.

Whether it actually counts as bad or not is another matter...one which I shall leave for the next poster

I suppose it depends on how often you go abroad in the year (12 months of monthly spend/repayment history is displayed), but if there's a generous splattering of £50/£100 etc cash withdrawals it could look bad when other lenders are searching your file.

Then again, these cash withdrawals won't be for round numbers (due to the exchange rate), so maybe lenders' systems are clever enough to see that total cash withdrawals (for one month) of, say, £178.45 are not UK based ATM withdrawals? Or maybe they could assume that, because they're not round numbers, they could be gambling transactions?

On balance though, I think I'd personally avoid them wherever possible. Depends on the savings involved, but I wouldn't risk trashing my credit rating for the sake of a tenner.

chattychappy

Yes, I've noticed that Experian are beginning to show "cash advance" amount and more detailed info for many cards.

Since NW started introducing charges, I've used Zero for cash overseas. I'm probably overseas for most of the year so really do put through a lot.

I haven't detected any panic amongst those I already have credit cards with (perhaps they haven't noticed) and it hasn't stopped me getting a new credit card (Tesco Clubcard platinum) in that time.

As a "distress indicator", only paying minimums is probably more significant.

With NW (debit) upping their charges again, I can only see more people using credit cards to get cash overseas. So even if it is currently seen as a "bad thing", perhaps this will change in the future.

stephane_2

I think it is a complete mis-conception to think that withdrawing cash from a credit card will trash your credit report, taking cash from time to time for whatever reason is not something that you should be concern about, what a credit card lender will be more interested in is how you're managing your account, how close you are to your limit and are you paying more than just the minimum payment. Minimum payment have a far greater impact than cash withdrawal.....

Jammi

I can see how regular cash withdrawals would raise eyebrows with some lenders considering the usual extra costs to the card holder of these transactions. Some credit card lenders (including Barclaycard) have lower cash withdrawal limits within the overall card limit. While it should not have a fatal effect on one's credit report, its quite possible to lose "Brownie points" for having to resort to a costly way to obtain cash. Surely the CRA reports this for a reason, just as they record the fact that One is making minimum payments.

That said, if I ever found myself short of cash before payday its cheaper to withdraw cash on my Halifax Clarity Card than dip into my agreed bank overdraft.

chattychappy

When I first got my Barclaycard Platinum, my cash limit was 50% of my overall limit. I never used it for cash. About a year after I had it they removed the restriction.

lisyloo

its quite possible to lose "Brownie points" for having to resort to a costly way to obtain cash.

But it's not a costly way to obtain cash abroad.
In fact it's one of the cheapest ways if you pay it all back quickly.
That's the reason I've got the Clarity card.

(Apologies if you were being tongue in cheek).

DrScotsman

No one's mentioned the other side of cash advances: Profitability

Someone who takes cash out on a credit card one month out of a year but has an excellent record otherwise - doesn't that sound less likely to be someone in trouble with cash and more likely to be a very good customer to have?

chattychappy

DrScotsman wrote: »

Someone who takes cash out on a credit card one month out of a year but has an excellent record otherwise - doesn't that sound less likely to be someone in trouble with cash and more likely to be a very good customer to have?

This is a good point and I've often wondered how they risk/reward thing gets reflected in decision making.

Surely the ideal customer is someone who constantly misses the minimums but keeps things under control. No doubt someone who misses payments has a higher propensity to become a bad debt, but the ones who don't go bad are great in terms of interest payments and fees.

Degenerate

Jammi wrote: »

I can see how regular cash withdrawals would raise eyebrows with some lenders considering the usual extra costs to the card holder of these transactions. Some credit card lenders (including Barclaycard) have lower cash withdrawal limits within the overall card limit. While it should not have a fatal effect on one's credit report, its quite possible to lose "Brownie points" for having to resort to a costly way to obtain cash. Surely the CRA reports this for a reason, just as they record the fact that One is making minimum payments.

The problem is that for those of us using Santander Zero and Halifax Clarity for cash abroad, these assumptions are totally false. As long as it's paid off quickly, it's actually the cheapest way to obtain foreign currency cash.