Halifax Clarity: Why take 2 months to take interest payment on a foreign withdrawal?

Tightasaducksarse

Hello,
I have a Halifax Clarity Card, which I use for foreign travel. Unusually, I had to use it in an ATM overseas. On my next statement I had an interest charged to this transaction. I was expecting this.

I paid my next monthly bill in full.

Why then did I get a further interest amount on the following bill? There were no other ATM transactions. When I spoke to a tele-person, all he could say was 'that's the way we do it', but I don't understand why all the interest was not added to the next bill after the ATM transaction.

Am I paying interest on the interest or what?

etienneg

You pay interest on a cash withdrawal from the date of the withdrawal until the date of payment. Interest on the first bill is from the date of withdrawal until the statement date. Inevitably, there will be more interest to pay from the date of the statement until it is paid. But the CC company doesn't know how much this will be until it has been paid, so it appears on the next statement.

That's what the agent meant by 'that's the way we do it' - not very helpful, I agree! It's called trailing interest and you will always find it is charged - unless you pay off the cash withdrawal before the first statement is produced.

zagfles

You might also get charged interest the following month, as interest on the interest between the statement date and payment date. But this should only be a few pence.

This is how interest usually works, whether you're being charged it (like on a loan, CC etc) or being paid it (like in a savings account). It accrues on a daily basis and is paid/charged at intervals eg monthly. There's a specific  exception for credit card purchases if you pay in full, but doesn't apply to cash withdrawals with most providers. 

In future try to pay off cash withdrawals as soon as you can. But note that payments always go towards statemented balances before unstatemented, so you can't pay off an unstatemented cash withdrawal until your previous statement balance is paid. But you can pay a statemented cash withdrawal without paying off the rest of the statement. 

Or could look at getting a Barclaycard Rewards card which makes things easy and treats cash withdrawals the same as purchases, ie no interest if paid in full. 

jbrassy

In future, it would probably be better to withdraw cash on a debit card where you don't get charged interest and it doesn't affect your credit history. Starling and First Direct do not charge fees on ATM withdrawals.

Tightasaducksarse

Well I don't understand this. A cash withdrawal on a credit card is not a loan and therefore should not accrue interest on a daily basis. It is a simple cash transaction. I understand that there is a charge for doing this but why should I have to pay interest until I pay my bill. Secondly. having paid the bill, why should I have further interest to pay. I know the rules but I don't understand the logic. 

sausage_time

I think you will find a cash withdrawal is a loan.   From the Halifax web page:  "We will charge interest on cash withdrawals, money transfers and balance transfers until you pay it back."   So when you pay off a statement, there may still be interest pending from the statement date until you pay it off - which will be applied the following month.

Hoenir

Tightasaducksarse said:

Well I don't understand this. A cash withdrawal on a credit card is not a loan and therefore should not accrue interest on a daily basis. It is a simple cash transaction. I understand that there is a charge for doing this but why should I have to pay interest until I pay my bill. Secondly. having paid the bill, why should I have further interest to pay. I know the rules but I don't understand the logic. 

The statement only includes interest to the date it's produced not the date the cash withdrawl is actually repaid. That's a loan as far as the CC is concerned. 

CliveOfIndia

Tightasaducksarse said:

Well I don't understand this. A cash withdrawal on a credit card is not a loan

How is it not a loan ?  They are giving you some of their money which you repay at a later date - the very definition of a loan.

Tightasaducksarse said:

Secondly. having paid the bill, why should I have further interest to pay. I know the rules but I don't understand the logic. 

If you Google for "trailing interest" you'll find dozens of articles and worked examples which will explain it clearly and succinctly.

There's nothing untoward going on - it's how all credit cards work whenever you've incurred interest for whatever reason.

NoodleDoodleMan

Tightasaducksarse said:

Well I don't understand this. A cash withdrawal on a credit card is not a loan and therefore should not accrue interest on a daily basis. It is a simple cash transaction. I understand that there is a charge for doing this but why should I have to pay interest until I pay my bill. Secondly. having paid the bill, why should I have further interest to pay. I know the rules but I don't understand the logic. 

Wrong, it is a loan, as stated above. 

All purchases on a credit card are a loan - the difference is that you have an extended length of time to repay for goods and services without interest, around 56 days best case scenario, not so on cash advances which incur interest on a daily basis following the transaction.

When/if the following monthly statement is settled in full by the date payment is due there should be no further interest.

The Barclaycard Reward CC is AFAIK the only credit card that does not involve ongoing interest for cash taken at a foreign ATM  - as long as the full balance, all transactions is cleared when the next monthly statement is due for settlement.

https://www.barclaycard.co.uk/personal/credit-cards/barclaycard-rewards

born_again

Tightasaducksarse said:

Well I don't understand this. A cash withdrawal on a credit card is not a loan and therefore should not accrue interest on a daily basis. It is a simple cash transaction. I understand that there is a charge for doing this but why should I have to pay interest until I pay my bill. Secondly. having paid the bill, why should I have further interest to pay. I know the rules but I don't understand the logic. 

You do understand what a Credit Card is & how it works?
It is a short term loan.
Cash based transaction accrue interest from day one. That is in the T/C.
Day one take cash. Statement day 10 (shows 10 days interest) you pay day 20. Another 10 days interest + days upto next statement. Rise & repeat. max 3 times.

NoodleDoodleMan

Using a credit card to withdraw cash at an ATM is not the best of choices.

There is way to use a Halifax Clarity card for such and reduce the interest to a neglible amount - but it means having sufficient funds in a current account and access to a mobile 'phone or similar device - and no other debited transactions sitting on the card.

I took around €70 from a machine in Spain, then checked how much that was as debited in GBP to the Clarity account - when we got back to the hotel soon after I transferred that amount from my linked BoS current account to fully settle the balance - only a few pennies, if anything, can't remember clearly.

Doesn't work of course if there are any other (non currency withdrawals) on the card though.