Halifax Clarity charges almost *twice* the advertised interest rate on cash advances

despistada

Summary: The Halifax will charge you multiple times for all cash advances made on their Clarity card.

Yes - they do not charge for cash advances.
Yes - there is a "perfect" exchange rate
Yes - they charge interest until the statement date.

BUT

They charge ADDITIONAL interest from the billing date on cash advances until they collect money via a direct debit - even if the account is paid in full. This will span at least 3 billing cycles.

The Halifax WILL NOT issue your statement AND collect the money on the same day. A minimum of 24 days must pass before they collect the money. ADDITIONAL interest is charged for these 24 days and added to your next statement.

Example (from my own account - interest charged at 17.5%)

• 23 August - Cash Withdrawal £148.78
• 22 Sept - Statement issued. Lists £1.96 interest for cash advance, payment to be collect on 17 Oct.
• 17 Oct - Account Paid in full via direct debit. Card not used again
• 24 Oct - Statement issued. Another £1.65 interest for period between 22/9-17/10 of original cash advance. Payment to be collected 18 Nov
• 18 Nov - Account Pain in full via direct debit. Card not used again.
• 22 Nov - Statement issued. Another £0.02 of interest for the period between 24/10-18/11

In this example the total interest charged £3.36 i.e. 27% annually on a card claiming to be 17.5%

Furthermore, three months AFTER making the cash withdrawal, I'm STILL accruing interest on the cash withdrawal despite paying the account in full via a Direct Debit.

If this is typical of all credit cards, then the advice given on this website is misleading. This is a hidden cost that even the MSE has overlooked.

richardw

Could you have paid any of it before 17 Oct?

TakeThis

It wasn't overlooked. The advice is to clear your balances as early as possible. If you choose to pay by DD, you will accrue interest as shown. Believe or not, the banks would like to make profits.

photome

On the other hand you could withdraw the cash and pay in full anytime after that day and get charged minimal interest

An example from my account

Admittedly withdrawing cash abroad would be, withdraw cash one day get a great rate with no fees then pay the amount owed by bank transfer about a week later (checking online how much is owed) and balance cleared with pennies paid in interest

dzug1

All other cards are the same.

But your arithmetic (or logic) is wrong - the annual rate is still 17.6%. You are just paying it for a greater part of the year than you imagined.

zagfles

despistada wrote: »

Summary: The Halifax will charge you multiple times for all cash advances made on their Clarity card.

Yes - they do not charge for cash advances.
Yes - there is a "perfect" exchange rate
Yes - they charge interest until the statement date.

BUT

They charge ADDITIONAL interest from the billing date on cash advances until they collect money via a direct debit - even if the account is paid in full. This will span at least 3 billing cycles.

The Halifax WILL NOT issue your statement AND collect the money on the same day. A minimum of 24 days must pass before they collect the money. ADDITIONAL interest is charged for these 24 days and added to your next statement.

Example (from my own account - interest charged at 17.5%)

• 23 August - Cash Withdrawal £148.78
• 22 Sept - Statement issued. Lists £1.96 interest for cash advance, payment to be collect on 17 Oct.
• 17 Oct - Account Paid in full via direct debit. Card not used again
• 24 Oct - Statement issued. Another £1.65 interest for period between 22/9-17/10 of original cash advance. Payment to be collected 18 Nov
• 18 Nov - Account Pain in full via direct debit. Card not used again.
• 22 Nov - Statement issued. Another £0.02 of interest for the period between 24/10-18/11

In this example the total interest charged £3.36 i.e. 27% annually on a card claiming to be 17.5%

Furthermore, three months AFTER making the cash withdrawal, I'm STILL accruing interest on the cash withdrawal despite paying the account in full via a Direct Debit.

If this is typical of all credit cards, then the advice given on this website is misleading. This is a hidden cost that even the MSE has overlooked.

There is nothing wrong at all in how they charged you. You made the withdrawal on 23 Aug and paid it off on 17 Oct. That's 55 days. They are quite clear that you pay interest on cash advances from the date of withdrawal to the date you pay it off.

APR of 17.5% with monthly compounding works out to a daily rate of 0.04436%

So on your Sept 22 statement you were charged 30 days interest on £148.78, which I make £1.98. They charged you £1.96.

Then on the Oct 22 statement you were charged 25 days interest, on the cash advance plus the interest on the cash advance ie on £150.74, which I make £1.67. They charged you £1.65.

Then on the Nov statement, the only outstanding part is the interest of £1.65, which was outstanding till you paid it on 18 Nov. You were charged 25 days interest on this, which I make 1.8p. They charged you 2p.

Theoretically this goes on forever, but interest on 2p is far less than a penny so will be rounded down to 0. That's the end of it.

If you make cash advances, pay them off ASAP. And bear in mind that if you make a withdrawal after your statement date but before your payment date, the payment will go towards the statement balance first before the cash advance. It's far easier to simply cancel the DD, and just pay the balance off in full when you get home off holiday.

despistada

photome wrote: »

On the other hand you could withdraw the cash and pay in full anytime after that day and get charged minimal interest

An example from my account

Admittedly withdrawing cash abroad would be, withdraw cash one day get a great rate with no fees then pay the amount owed by bank transfer about a week later (checking online how much is owed) and balance cleared with pennies paid in interest

I've spoken to Halifax about this option. It's not black and white, and there's a gotcha that can cause the account to be suspended.

Yes you can make a payment at any time, if you clear off the balance, the Halifax will charge no more interest. But you'll have to call, as the website only tells you the last statement balance and nothing about accruing interest.

However, if you use the card again, prior to statement date, they'll start charging interest on the outstanding balance upto the full value of the cash advance.

If you try to avoid this and overpay your account (Pre-loading as it used to be called) to give you an extra buffer. Halifax informed me the system can suspend the card until you money is returned via a check. Although the Halifax rep did say overpaying by just few quid should not cause this problem.

despistada

Thanks for all your replies. I've spoken to Halifax and some other banks and this appears to be standard practice. However the MSE article for Cheap Travel money is still wrong.

This is the article: moneysavingexpert.com/travel/cheap-travel-money

In bold letters they've written "Set up a Direct Debit to repay in full every month, or the interest charges dwarf the cheap gains"

If you follow the article's advice. i.e. Set up a Direct Debit for the full amount then withdraw £100 of cash on the Halifax Clarity card, it'll cost £1.

Here's the example: moneysavingexpert.com/travel/cheap-travel-money#halifax

That's incorrect, set up a Direct Debit as instructed and you will be charged upto 2 months interest (or 55 days according to zagfles) that's almost £2 i.e. TWICE the amount stated in the article.

You must follow these instructions to achieve the charges quoted by MSE.

1. On your statement date, check your balance on-line (i.e. DON'T wait for the postman and DON'T wait until you get back from your Holiday if your statement is due.)
2. Send an IMMEDIATE payment to Halifax (i.e. you bank must support Fastpay for a same day transfer) for the full amount.

Get it wrong, and it'll take another month until you find out, and you'll be paying additional interest on your mistake.

There's scope for the article to be improved, so I'll drop Martin a line and raise the issue with him. In the meantime, I hope this thread will serve to enlighten. As neither the MSE article of Halifax's own Terms and Conditions (halifax.co.uk/creditcards/low-rate-no-fee/clarity-card/terms/) make this *clear*. Which is something we've all come to expect from the MSE.

---

Note, you'll need to add www to the links above, as I'm a new user and I can't post active links.

luci

I made a payment to my Clarity account on the same day as I made a cash withdrawal for the maximum amount allowed. I expected to pay 3 days interest as the Clarity account doesn't accept Faster Payments. However when I checked my account online a few days later, I was only charged 10p in interest.

If you know of a way to get foreign currency cheaper I'd like to hear about it.

TakeThis

luci wrote: »

I made a payment to my Clarity account on the same day as I made a cash withdrawal for the maximum amount allowed. I expected to pay 3 days interest as the Clarity account doesn't accept Faster Payments. However when I checked my account online a few days later, I was only charged 10p in interest.

If you know of a way to get foreign currency cheaper I'd like to hear about it.

Metro Bank, N&P, Cumberland BS......

adindas

I am pretty sure "luci" is very well aware about this. She together with Dzug1 is one of the most active contributors of traveling and travel money.

I am pretty sure what she meant is the "Credit Cards" for foreign withdrawals not Bank a/c just do not make it clear as here we are talking about a credit Card.

I add one more on your list "Santander Zero" with Zero debit cards as long as you have a qualifying a/c.

TakeThis wrote: »

Metro Bank, N&P, Cumberland BS......