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 liquidate it, when your credit card interest rate is lower.
You can also use a money transfer credit card to add some 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 in debt on your money transfer card.
But because some money transfer cards charge no interest on the debt, it’s often cheaper than having an overdraft. The Financial Conduct Authority (FCA) found that overdraft fees charged for unpaid overdrafts were often 10 times higher than fees for payday loans. The FCA therefore introduced new legislation to monitor this, forcing 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 period of 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 first be approved.
One advantage is that by transferring a sum of money to your checking account, you 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.
The transfer fee is usually around 1% to 3% of the money transferred. You should take this into account in your calculations when determining whether it is worth making the transfer.
Compare the cost of the transfer fee with the cost of continuing to pay your overdraft fee. Although overdraft fees are no longer allowed, banks can charge a fixed interest rate. Some have already introduced rates of up to 40%, which the FCA has looked into.
So, transferring money from your money transfer credit card to your bank account can help you sort out your finances in the short term.
Remember to think about how you are going to pay off your money transfer credit card debt. For example, you could set up a monthly payment from your checking account to gradually settle the debt.
The best money transfer cards have 0% interest periods that last 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 and balance transfer cards?
Money transfer cards and balance transfer cards are similar in that they both involve the transfer of debt from one place to another.
With a balance transfer card, you can transfer debt from one card that charges you interest to another with less or no interest. This can be a good way to pay off existing credit card debt or consolidate your debt.
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 some money to pay off debt or provide a quick boost.
You can use a money transfer card to access cash or pay off an expensive loan.
A money transfer card can be useful in helping 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 take advantage of 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 at a branch.
To make sure you get the best one for you, it is recommended that you compare money transfer cards first. You can do this using comparison tables like the one above.
Once your request is approved, the card provider will mail the physical card to you. It may take around 5 business 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 money. You can do this without incurring any fees or charges (as long as it’s an ATM that offers free cash withdrawals).
This is a much better option than trying to withdraw money with a credit card. Technically, you can withdraw money with your credit card. But it’s best to avoid it because it shows up on your credit report and damages your credit score.
How to find the best money transfer card?
The right money transfer credit card deal for you is the one that best meets your very personal financial needs.
If it takes a long time to settle 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 typically trade off the length of the interest-free period for a transfer fee. The longer the 0% period, the higher the transfer fee 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 might get a card with a short interest-free period and low transfer fees.
By spreading your repayments over a longer period of time, you can pay less each month. In this case, a longer interest period might be your best option, even if the transfer fees are 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 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, saving you £ 100.
Remember, you need to meet your minimum monthly repayments or risk losing your 0% interest offer and this great way to save money could get very expensive.
Are credit cards with money transfer the best way to borrow money?
Credit card transfers can be an effective way to borrow small amounts of money for the short term without paying interest. But they may not be the best way for you to borrow money.
Generally, you need a good credit rating to get one. If you get a bad 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 that 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 APR, or annual percentage rate.
What does “most popular” mean?
When we use the term “most popular” on Uswitch in reference to credit cards, these cards are ranked based on the number of clicks they have received on the site in the last 48 hours.
The most clicked cards are at the top, the least at the bottom. This reflects their popularity with visitors to Uswitch.com. Therefore, this is a good table to look at if you want to see which cards most people think are worth buying.