If you want to clear an overdraft or borrow a small sum of cash, a money transfer credit card can transfer money into your current account.
In order to transfer money over from a credit card to a debit card, you will need what is called a money transfer credit card.
Money transfer cards are similar to balance transfer credit cards, which allow you to pay off debts from other credit cards at 0% interest – but a money transfer credit card allows you to transfer money to a bank account, whereas a balance transfer card does not.
When comparing money transfer credit cards you will likely come across credit cards that also allow you to carry out a balance transfer. However, when using either of these functions on your credit card you should expect to pay a fee on a percentage of the money you are planning to transfer.
Most balance transfer credit cards have a fee of around 1% to 4% of the money being transferred – the longer the 0% balance transfer deal, the higher the fee will probably be, and vice versa. Meanwhile, money transfer credit cards generally charge higher, with an average fee of around 4% regardless of the length of the 0% deal.
The way these cards work is they will give you a length of time to repay the money at 0% interest in exchange for paying the balance transfer or money transfer fee. It can often work out cheaper than if you are repaying a debt yourself on your current interest rate, especially if your debts are on your bank account.
Similarly, it can be cheaper than taking out a loan to buy something you wouldn’t normally be able to buy with a credit card, like a car for example.
Transferring money from a credit card to a debit card
If you don’t have a money transfer credit card, you might still be able to use your current credit card to put cash in your bank account, but this is something we strongly discourage as it can lead to huge amounts of debt and high penalty fees.
Depending on how you view it, credit card companies generally do not like people using their cards to withdraw cash or to use a credit card as a cash item (they might like it though as they stand to make lots of money out of the customer!).
In order to discourage this credit card providers put up high penalty fees for doing so at the point of transaction and charge you daily interest from the moment it happens until it is fully paid back.
For example, if you were to use a credit card to withdraw cash from a cash machine so you could put that cash into your bank account, you would usually be charged a fee of around £3 to £4 even if the cash machine you were using said it was ‘free’.
The APR on your credit card would then kick in from the moment you took the money out and will be charged daily until you pay it all back in full.
Similarly, this same process of penalties and interests might apply if you decided to use your credit card to pay for things that could later be used as cash. For example, paying off an overdraft bill would count in this way as you could in theory later use that money as cash.
Quite a common mistake people make is using a credit card to pay for gambling chips or any kind of gaming tokens that can later be converted into cash.
So if you do want to transfer money from your credit card to your debit card, do it with a money transfer credit card to avoid paying excess interest and penalty fees.
How to use a money transfer credit card
Compare the fees of the money transfer credit cards (as mentioned previously, many of them will be around the 4% mark) and check how long the 0% interest period is.
Ideally you want the longest 0% interest period with the lowest money transfer fee, so look for a combination that gives you a cheaper deal in total.
However, it’s worth noting that the best money transfer credit card deals are harder to get if you do not have a good credit score. Before applying for any credit make sure that your credit score is in good shape as multiple rejections can lower your score further and make it much harder in future to obtain any credit cards, mortgages or loans.
When you apply for your money transfer credit card you will usually be asked how much you want to transfer to your bank account, including your account details. The credit card provider will then transfer the money to your bank account, which you can then use as normal via your debit card or as cash withdrawn from a free machine at no extra charge.
When you receive your money transfer credit card you will then owe the amount you borrowed on it plus the money transfer fee. For example, if you borrowed £5,000 with a 4% fee, you will owe £5,200 within the 0% interest free period.
Make sure you can pay off the total within the 0% interest free period as many of the money transfer and balance transfer credit cards revert to a higher than average interest rate, which could leave you paying back a much higher amount of debt and over a much longer period of time.
What to look out for when transferring money from credit cards
If you are using the money transfer credit card to help you pay off a loan or mortgage, make sure you won’t be incurring any early repayment penalties.
Many loan providers want you to pay off a specific amount of the debt each month, so if you suddenly had a lump sum of cash allowing you to pay off a larger proportion, which would clear the debt quicker, just make sure you won’t be charged a penalty fee.
Even though there will likely be a 0% interest free period, make sure you are still paying back at least the minimum amount each month to avoid being hit with a late payment charge.
Also, avoid spending on your new money transfer credit card. Only use it for the initial transfer from the credit card to your bank account, as you will be charged at the original interest rate for any new purchases you make unless you repay the debt in full at the end of the month.
Alternatives to money transfer credit cards
The most obvious alternative to a money transfer credit card is a current account overdraft. If the reason you are thinking of taking out a credit card isn’t to repay your overdraft, then using an overdraft could be a useful way of getting cash.
Often you won’t be allowed to borrow the same amount you could with a credit card, but some bank accounts will allow you to repay it with no interest up to a certain amount. Be careful when you do your comparisons, as some overdraft charges can be extremely expensive.
- Store cards Find out more about store credit cards that offer discounts or retail rewards points as you spend.
- Stoozing How you can use your credit cards to make money.
- Airline credit cards Read the guide on cards that reward you with Airmile of avios points on your purchases.