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I am planning to use Halifax clarity credit card abroad when I travel to Europe. The credit card offers good rates while using abroad with no transaction charge or non sterling transaction charge (only interest charges apply). If I use my debit card abroad there are host of charges which come into the picture.

My question is can I make payments into my credit card from my debit card bank account without even using it and then use that money for credit card transactions? This means if my credit card balance is nil (not used even once for any transaction) and I pay suppose £500 from by bank account into credit card - can I use the paid amount through my credit card transactions in the future?

My assumption here is that I won't pay interest charges unless I start using my actual credit card limit. Am I right in understanding this or am I missing something?

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    Your question is very similar to money.stackexchange.com/questions/26776/… Can I prepay a Credit Card to make a Large Purchase greater than my credit limit? Jul 4 '14 at 16:51
  • This is simply NOT possible today - it's simply forbidden to have a "positive balance" (as part of overall money laundering efforts).
    – Fattie
    Jan 7 at 13:10
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You don't pay any interest until a few weeks after you receive your statement, when the payment is due. Simply set up a direct debit with Halifax for the statement balance and they will take the correct amount (whatever you spent that month) from your bank account on the payment due date. Problem solved!

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I'm in the US, and I can't speak for all credit cards, but I have done this in the past. I've paid extra on my credit card, and had a positive balance on my credit card account. The purchases made after paying extra were applied to the balance, and if there was money left over on the statement closing date, I didn't owe anything that month.

Of course, I didn't incur any interest charges, but I never pay interest anyway, as I always pay my statement in full each month and never take a cash advance on my credit card.

You could call your credit card company and ask them what will happen, or if you are feeling adventurous, you could just send them some extra money and see what happens. Most likely, they will just apply it to your account and give you a positive balance.

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    @Fattie You might be right about that; I haven’t tried this in years. Is there a law that has changed recently that prevents this? Jan 7 at 13:26
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    @TTT - US-specific info: gao.gov/new.items/d02670.pdf "Fifteen of the 499 SARs related to customers overpaying their credit cards and subsequently asking for refund checks. FinCEN noted that overpaying a credit card could be used as a means to launder money because it provides a simple means to convert criminal or suspicious funds to a bank instrument with minimal or no questions as to the origin of the funds."
    – BobbyScon
    Jan 7 at 18:31
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    @TTT , good question, it literally happened to me, like there was $100 owing so I sent in a few thousand ("so it would be ahead"), and I got in "trouble" you know? subsequently I asked blokes who do CC software and they confirmed..
    – Fattie
    Jan 7 at 18:35
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    ah @BobbyScon has the info to back up my vague claim - cheers !!
    – Fattie
    Jan 7 at 18:36
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    @TTT - I'd agree that the issue is more so the CC accounts not being set up to accommodate that methodology of banking. I don't think anyone sees overpayment as a problem (and even Cap 1 has an article on their site about how it's OK when it's "unintentional or due to a refund"). The problem is when someone dumps money into an account and then has the CC company or bank actually issue them a refund check. The outbound check is issued from a different account than the money was "stored" in.
    – BobbyScon
    Jan 7 at 19:16
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I have done this in US and in UK. Had a credit card that had a 1000 limit and wanted to buy a 1300 laptop. So I deposited money in advance in the card and then used it.

One caveat though, several card companies (Capital One, Discover and possibly others) would cut you a check for any extra funds that may be in the card at the time of monthly cycle. That also happened to me as I overpaid the card accidentally and just thought to use it over next month or so but got a check instead.

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Unfortunately not. Even if the credit card balance is positive (i.e. customer has overpaid the credit card account), you cannot withdraw cash (for free) - as any cash withdrawal is subject to 12.9% interest - even if repaid in full at the end of the month!

The clarity credit card is one of the best cards for overseas spending, as its load free (no fees for purchases abroad) and it gives near perfect exchange rates. If your balance is positive, you start at £0, then fund that credit card account from your bank account £500. You can then spend on your credit card, and when your next bill is due at the end of the month - they will use that extra £500 sitting in your account first, and ask for the remainder from you.

i.e.

scenario1:

  • £500 extra put into clarity account.
  • spend £480 on holiday on clarity card.
  • Halifax will owe you £20 at the end of the month.

scenario 2:

  • £500 extra put into clarity account.
  • spend £520 on holiday on clarity card.
  • Halifax will send you a bill for £20 at the end of the month.

It is better in my opinion, to set up a direct debit to always clear out the full amount on your credit card. That way, you have cash in your bank account for emergencies (getting £500 back from a credit card will take a few days to process as opposed to having the ability to withdraw cash from the cashpoint 24/7). And once the direct debit is paid automatically at the end of the month, there are no fees - voila your credit card is almost like a debit card, spend on it when you like, it gets paid automatically, no hassle, no worries. This approach does take a careful mindset though, as you need to know your credit limits and also you need to ensure your bank account has enough to pay off the direct debit at the end of the month. Otherwise those darn fees will get you (and hurt your credit rating).

For cash spending, you will want to either take cash with you (check online here for best rates & get the money well in advance to avoid fees). Also in some countries the exchange rate is better there, than in the UK, google will help you here.

If you dont like the idea of carrying large sums of cash with you can use a prepaid card like CaxtonFX, which is one of the better ones out there. The other well known ones are FairFX and Travelex Cash Passport.

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  • thanks for your answer. What about purchase transactions - do they fall in same category as cash?
    – vicks1
    Jul 4 '14 at 16:47
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    Op is not asking to withdraw cash from the Credit Card, only to overfund it. Jul 4 '14 at 16:48
  • @JoeTaxpayer edited answer, hope it helps
    – Husman
    Jul 4 '14 at 16:57
  • @vicks1 no a credit card transaction is not the same as a cash withdrawal (as a small fee is paid by the shop/venue you use your credit card at - hence the customer can use it fee free). But check my updated answer above, it should answer your original question now.
    – Husman
    Jul 4 '14 at 16:58

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