What is a money transfer credit card?
A money transfer card allows you to transfer money from your credit card to your bank account. It is effectively the same as a cash loan.
This can be useful if you are paying a high interest rate on your bank overdraft and want to clear it, or the interest rate on your credit card is lower.
You can also use a money transfer credit card to add money to your checking account for a short-term loan. It is likely to be cheaper than a formal credit loan.
How do money transfer credit cards work?
A credit card money transfer card transfers money from your credit card to your bank account. You will then be indebted on your money transfer card.
But since some money transfer cards don’t charge interest on the debt, it’s often cheaper than having an overdraft. The Financial Conduct Authority (FCA) found that overdraft fees charged for unarranged overdrafts were often 10 times higher than fees for payday loans. The FCA has therefore introduced new legislation to monitor this, requiring banks to be transparent with their fees. Despite this, you will still be charged interest.
This is why money transfer credit cards can be useful if you need a cash loan for a short time.
Can I transfer money from a credit card to a bank account?
Yes, you can transfer money from a credit card to a bank account. But your money transfer card application must be approved first.
One advantage is that by transferring a sum of money to your checking account, you can avoid paying interest on your debt.
Not all credit cards are designed to allow you to transfer money from your credit card to your checking account. Those that are will charge you a small fee.
Transfer fees are usually around 1% to 3% of the money transferred. You need to factor this into your calculations when determining if it’s worth making the transfer.
Compare the cost of the transfer fee with the cost of continuing to pay fees on your overdraft. Although overdraft fees are no longer allowed, banks can charge a fixed interest rate. Some previously introduced rates of up to 40%, which the FCA has reviewed.
So, transferring money from your money transfer credit card to your bank account can help you settle your finances in the short term.
Don’t forget to think about how you will pay off the debt on your money transfer credit card. For example, you could set up a monthly payment from your checking account to gradually clear the debt.
The best money transfer cards have 0% interest periods that last for over 2 years. If you pay off your balance in full during this interest-free period, you will not pay any interest.
What is the difference between money transfer cards and balance transfer cards?
Money transfer cards and balance transfer cards are similar because they both involve a transfer of debt from one place to another.
With a balance transfer card, you can transfer debt from a card that charges you interest to another with lower or no interest. This can be a good way to pay off existing credit card debt or consolidate your debts.
A money transfer card allows you to transfer money (credit) from the card to your bank account, where it is considered cash. Many people use these cards to pay off an overdraft.
It’s like freeing up a sum of money to settle debts or provide a quick cash boost.
You can use a money transfer card to access cash or pay off an expensive loan.
A money transfer card can be useful to help you access cash if you need to make a cash purchase.
Or you can use the money from your money transfer card as an interest-free loan to pay off existing debts.
The 0% interest period on money transfer credit cards means you could avoid paying interest on your debt. To qualify for this benefit, you must repay the entire balance before the interest-free period expires.
Some of the best money transfer credit cards have an interest-free period of over 2 years.
How to transfer money from a credit card to a bank account
To transfer money from a credit card to your bank account, you need a card designed for this purpose. You can apply online, by phone or in branch.
To be sure you’re getting the best one for you, it’s recommended that you compare money transfer cards first. You can do this by using comparison charts like the one above.
Once your application has been approved, the card provider will mail you the physical card. It may take around 5 working days.
Once you have your card, you can transfer credit to your bank account. When the money arrives in your checking account, you can spend it the same way you normally would with your debit card or by withdrawing cash. You can do this without incurring any fees or charges (as long as it’s an ATM that allows free cash withdrawals).
This is a much better option than trying to withdraw cash with a credit card. Technically, you can withdraw money with your credit card. But it is better to avoid it because it shows up in your credit report and damages your credit score.
How to find the best money transfer card?
The right money transfer credit card offer for you is the one that best suits your very personal financial needs.
If it’s going to take a long time to sort out your finances, compare money transfer credit cards with the longest interest-free periods.
To lower the cost of your debt, consider a money transfer credit card with the lowest transfer fees. You can see the different options in our comparison tables.
Things to Consider Before Applying for a Money Transfer Credit Card
Money transfer cards usually trade the length of the interest-free period for the transfer fee. The longer the 0% period, the higher the transfer fees and vice versa.
The best money transfer credit card for you ultimately depends on how long you think it will take you to pay off the debt. If you think you can pay off the debt in a short time, you can get a card with a short interest-free period and low transfer fees.
By spreading your repayments over a longer period, you can pay less each month. In this case, a longer interest period might be your best option, even if the transfer fee is higher.
How can I use a money transfer card to save money?
A money transfer card can help you save money that you would otherwise have paid in interest on your current debt.
For example You have a debt of £1,500. The Annual Percentage Rate (APR) on your debt is 20%. This adds £25 per month to your debt (£300 per year).
You decide to use a money transfer fee to pay off the debt. The offer on the card is 0% on money transfers for 24 months.
The cost of transferring money to your bank account is 4% or £60. Although your debt is now £1,560, you won’t have to pay interest for 24 months, potentially saving you £100.
Remember that you must meet your minimum monthly repayments or risk losing your 0% interest offer and this great way to save money could become very expensive.
Are money transfer credit cards the best way to borrow money?
Credit card transfers can be an effective way to borrow small amounts of money on a short-term basis without paying interest. But it may not be the best way for you to borrow money.
Generally, you need a good credit score to get one. If you have a low grade and apply anyway, you risk being rejected by the card provider. A rejection will further damage your score.
To avoid paying interest on credit card debt, you need to make sure you can at least meet the minimum repayments.
If you do not repay the card before the interest-free period expires, you will be charged interest on the remaining debt. This is the map APRor annual percentage rate of charge.