Money transfer credit cards explained

13th July 2018

By Kurt Wood

Are you looking for an affordable solution to pay off debts? Or perhaps you need a cash injection to cover the cost of a big purchase? Money transfer cards can be a great way of keeping interest low on existing loans and getting the financial boost you need, but they have to be used responsibly to avoid the dreaded debt spiral.

Here’s how money transfer credit cards work.

What is a money transfer credit card?

Money transfer cards let you transfer money from your credit card to your current account. They are designed for people who need a cash injection, usually to pay off existing debt in the most cost-effective way.

The money transferred from your card to your current account can be used to repay loan amounts, cover overdrafts, or even settle the costs of expensive payday loans and other short-term loans.

Money transfer vs. balance transfer

Money transfer credit cards are different to balance transfer credit cards, although the two are easily confused. Balance transfer cards move your balance from one credit card to another, which makes them ideal if you want to consolidate a few credit card debts.

A money transfer credit card lets you move money from your credit card to your bank account. This has a wider range of uses.

The benefits of money transfer cards

There are a number of reasons you might consider a money transfer credit card:  

Clear loan balances – one of the biggest benefits of a money transfer card is paying off loan balances. Money transfer cards usually have special offers and lower interest rates, so you can cut your monthly outgoings.

Get 0% interest deals – many money transfer cards come with 0% interest for a set period (usually between 12 and 36 months). Take advantage of this and you could eliminate interest costs altogether, helping you pay off your debts more quickly. If you repay the entire balance within the agreed timeframe, you won’t have to pay any interest at all – although you’ll usually have to pay a small transfer fee.

Fund large purchases – there are some purchases you can’t pay for with a credit card. With a money transfer card, you can move funds into your bank account from your credit card, which gives you more control over how you spend the money. If you’re preparing for a large purchase (such as a second-hand car or home refurbishments), a money transfer can give you the cash boost you need.

Cover multiple debts – money transfer cards give you full control over your money. You can cover various debts or pay off parts of loan balances. The choice is yours, giving you a flexible way of managing your finances.

Should I use money transfer cards for debt?

If you want to cut the amount you pay in interest, a money transfer card could be a great option. Used responsibly, this type of card can help you clear your debts quickly.

Many of the leading card providers offer up to three years no-interest, so there's time to pay everything off without incurring hefty interest charges.

Can I transfer money from credit card to bank account for extra cash?

Yes, you can also use money transfer cards for a cash injection. For things such as home improvements or other big purchases, money transfer with 0% interest can often work out cheaper than a personal loan. Just be sure to repay your whole balance before the interest-free period comes to an end to avoid charges. It’s also important to remember that any sort of borrowing can affect your credit profile, so it’s always better to raise the cash yourself if you can.

Can you transfer money from a credit card with any bank?

If you already have a credit card with your bank, you might not be able to transfer funds. Credit cards that do allow cash transfers or cash withdrawals from ATMs won’t come with an interest-free period.  Search the market specifically for ‘money transfer credit cards’ to see what’s on offer, and from which lenders.

How much can I transfer?

As with any credit card, money transfer cards come with transfer limits. Your provider will confirm your credit limit once they’ve accepted your application. An ‘assumed credit limit’ will be advertised, but your actual offer might not match this.  

In many cases, not all of this credit limit is available for transfer. Some card providers will only allow you to use a percentage of it for money transfer – usually around 90%. For example, if your credit limit is £3,000 with 90% allowed for transfers, you will only be able to transfer £2,700 into your current account.

Things to be aware of

When shopping for money transfer credit cards, here are the things to be aware of:  

Interest-free period end date – be sure to note the end date of your interest-free period and take note of the APR you’ll pay once this period ends. If you can’t clear the balance in that time, make sure you can afford the interest on your repayments.

Credit limit – the advertised credit limit may not be what you get, and some providers only let you use a portion of your credit limit for transfers.

Transfer fees – although money transfer cards come with an interest-free period, there are often transfer fees involved (usually around 3%). For a £2,000 transfer, you may need to pay £60 as a one-off cost.

Other fees – there may be other fees to watch out for, such as charges for going over your limit, charges for missed payments, or early repayment charges. Be sure to read the small print when you apply.

Can anyone get a money transfer card?

Just like any other credit card, there’s no guarantee your application will be accepted. If you have a bad credit score, you may find it hard to get the card deals that you want. Before you start shopping around for credit cards, you should check your credit rating online. You can also use a ‘soft search’ credit card eligibility checker, which doesn’t affect your credit profile, to see what’s available to you.

How to find the best money transfer cards online

To find the best money transfer cards online, we recommend using our credit card comparison tool. It’s free, and it will give you access to the best credit card deals from the UK’s top providers.

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