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How (not) to use your Halifax Clarity CC

Venusflytrap
Venusflytrap Posts: 564 Forumite
edited 8 May 2011 at 2:41AM in Credit cards
The general principle is not to withdraw cash from your CC to avoid coming across to lenders as having a cash flow problem. Also to spend regularly on your CC and repay on time and in full.

I understand that cash advances may negatively impact one's credit rating, but what of cash withdrawals abroad using the clarity card which doesn't attract any fees except interest from date of withdrawal? Does your lender (or others) still view this unfavourably or simply as a customer taking advantage of one of the card's unique benefits?

Also, I only use my clarity CC 2 - 3 times a year when on hols: can this be considered too little activity/not profitable enough and, over time, lead to my account being reviewed/closed? From a credit worthiness perspective, could CC lenders be "put off" by too few greens on my credit report to want to lend a similar product to me in the future?

Which rules apply here?
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Comments

  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Now that lenders are reporting more info about account use to the CRAs the cash withdrawals could look bad. However, since you'll be clearing the card in full each month (presumably?) this should, I would have thought, offset any negative impact of the withdrawals.

    I understand Halifax report account status as at statement date (not some random date in the month when the CRA update is sent), so obviously the balance of any spending you do between one payment due date and the next statement date will be reported...possibly indicating that you didn't clear the previous statement in full?

    All that said, I wouldn't imagine 2 or 3, say, £300 cash withdrawals a year would look too bad on a credit report?

    As to other lenders thinking you're just using a card's features, they won't even know it's a Halifax card, let alone a Clarity card, because lenders' names are not listed against the account on your credit report.

    Re too little card usage, I have 'dormant' cards and they still get reported with a zero each month if I don't use them. And so they should, because my payments are clearly still 'up to date'.
  • Venusflytrap
    Venusflytrap Posts: 564 Forumite
    Thanks Yorkshireboy.

    Yes, I clear my CC balances in full each month. You say that cash advances could look bad on a credit report but clearing in full may nullify the effect. It was my understanding that merely withdrawing cash with a CC - whether repaid in full or not - looks bad and -vely impacts ones credit score?

    It would be beneficial if when lenders assess ones credit worthiness, they are able to take into account 'justifiable' cash withdrawals where repaid in full and are more competitive than say using a standard CC/debit card abroad or converting ones cash to forex, and not immediately think: "this person has a cash flow problem; we'll decline them further credit."

    Until then, when abroad, i'll either spend my own cash or use my clarity card for purchases only.
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You say that cash advances could look bad on a credit report but clearing in full may nullify the effect. It was my understanding that merely withdrawing cash with a CC - whether repaid in full or not - looks bad and -vely impacts ones credit score?
    Correct...it 'could' do, but 2 or 3 per year 'shouldn't' look too bad, especially if accompanied by an exemplary credit file. Obviously someone like myself, carrying £30K+ stoozing balances, and anyone else who doesn't clear other cards in full each month, shouldn't be making cash withdrawals at all because that would smack of desparation!
    It would be beneficial if when lenders assess ones credit worthiness, they are able to take into account 'justifiable' cash withdrawals where repaid in full and are more competitive than say using a standard CC/debit card abroad or converting ones cash to forex, and not immediately think: "this person has a cash flow problem; we'll decline them further credit."
    That's for your appeal letter, if declined.
    Until then, when abroad, i'll either spend my own cash or use my clarity card for purchases only.
    It sounds like you'd already made up your mind before posting?
  • lisyloo
    lisyloo Posts: 30,094 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I am using Clarity for cash advances for holidays.
    I don't expect it to be a problem as I have a very good credit record with lots of history, so I think it does come down to your circumstances.
    I think lenders will start to become aware that people are using credit cards for cash on holidays.
    I think they will generally look at the "whole" picture although we can all be subject to the "computer says no" problem if we don't fit exact criteria.

    If you are worried about it then do what you suggest and find the next cheapest way to finance money abroad without cash advances.
    I would simply look at it as an additional (and fairly small) cost of going on holiday like travel insurance.
  • phreddy
    phreddy Posts: 2 Newbie
    After seeing that Clarity was cheaper than Nationwide who have now renagued on their free worldwide cash withdrawals, I applied expecting a 12.9% rate. No it is a scam, they offer 29%. Sprat to catch a mackeral, in my opinion!!

    FairFX have also bumped up their costs.

    I spend a lot of time abroad so it is not a small cost.
  • rb10
    rb10 Posts: 6,334 Forumite
    phreddy wrote: »
    After seeing that Clarity was cheaper than Nationwide who have now renagued on their free worldwide cash withdrawals, I applied expecting a 12.9% rate. No it is a scam, they offer 29%. Sprat to catch a mackeral, in my opinion!!

    I assume that is a typo - the maximum rate that Halifax will give on a Clarity card is 21.9% so you can't have 29%.
    Halifax wrote:
    Your APR Explained

    As we treat all our customers and their applications on an individual basis, the APR and interest rates we offer are determined by the details customers supply, along with an independent verication of credit and repayment history.

    Your personal APR will be from 12.9% APR variable to 21.9% APR variable, depending on individual circumstances.

    51% of customers are offered our best rate of 12.9% APR representative (variable).

    Assuming you pay off any cash advances within a month, this is still significantly better than the rates that most banks offer.

    Besides, if you manage the account well (pay it off in full each month) and manage other accounts well, you could well find that your interest rate reduces over time.
  • chattychappy
    chattychappy Posts: 7,302 Forumite
    I've been using Zero for cash for a couple of years now. I spend long periods abroad and depending where I am, typically use it weekly for cash.

    Generally never had a problems getting credit. Zero themselves have come back with repeat offers and increased my limit.

    Who knows what position different lenders take! I'm guessing this factor is not so important nowadays (if it ever was). If you are showing distress in other ways (eg missed payments) then perhaps drawing cash is another nail in the coffin.
  • lisyloo
    lisyloo Posts: 30,094 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Assuming you pay off any cash advances within a month

    Very good point.
    Clarity card (at the 12.9%) rate is about 1% over a month.
    If you pay it off as soon as you get back from holiday then it's even less.
  • Roger1
    Roger1 Posts: 1,603 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    lisyloo wrote: »
    Clarity card (at the 12.9%) rate is about 1% over a month.
    If you pay it off as soon as you get back from holiday then it's even less.
    Quite right. My latest statement spells it out clearly:
    '- Interest charged this month: Cash at 0.033% per day (12.92%) £..'

    0.033% per day, and credit too? It's a no-brainer.
  • SecLender
    SecLender Posts: 67 Forumite
    I never really considered that withdrawing cash on CC would adversely affect your credit score.

    I've used CC's lots of time for cash withdrawls when abroad not just with the Clarity card. My last holiday I took out about £1000 during 10 days.

    As long as your not leaving cash withdrawl balances on your card for extended periods I can't see this being a problem. Certainley never caused me any problems getting credit...
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