A money transfer credit card enables you to move cash from your credit card to your bank account, either to sort out your overdraft or for you to use to clear another debt. You usually pay a fee to move the money, but once it is in your account you may not have to pay an interest on the sum for 12 to 18 months. You will still have to pay it back eventually, though, so treat the money transfer as a loan and think carefully about how you will pay it off before you go ahead.
You might need to transfer cash quickly or to borrow some money to help with cashflow but you don’t want to apply for a loan. If you were to withdraw money using your normal credit card you would be charged a cash withdrawal fee, and then immediate interest from the day you made the withdrawal. This can work out very expensive, so you should avoid this approach.
Instead, you could consider using a money transfer credit card to move cash into your bank account. Although it will still incur a transfer fee, the costs will be lower because you won't be charged immediate daily interest.
Using a money transfer credit card can give you a short-term cash boost, but it is still a more expensive way to borrow money than using your overdraft or credit card credit allowance for purchases. Read our guide on how to transfer money from a credit card to a debit card, what it costs and how money transfer cards work.
Sometimes you might need a small sum of money but you do not want to take out a formal loan. If you want to clear an overdraft or borrow a small sum of cash, you can use a money transfer credit card to move credit into your current account.
Bear in mind that you are borrowing money to pay off an existing debt, and this can become a dangerous habit.
If you are having problems with your cashflow and need help with your finances you can contact a charity such as StepChange or National Debtline who will give you debt advice for free. Never take on more debt if you cannot afford it or if you have no way of being able to pay it back.
You can transfer money from a credit card to a debit card if you have a credit card that permits this. Be aware that you need to check first whether you will be charged any fees for interest for making the credit card cash transfer. You can still go ahead even if you will be charged fees, but you should weigh up whether the cost makes it worthwhile.
Once the money is in your bank account you can spend it via debit card, or withdraw it as cash from a free ATM at no extra charge.
If you want to borrow some money on your credit card and transfer the cash over to your debit card then a money transfer credit card allows you to move a sum of money from your credit card to your bank account.
You can then spend the money in your bank account using a debit card, or you could use the sum in your bank account to clear another debt, like an overdraft.
You will need to apply for a money transfer credit card and go through the usual credit checks. You also need a plan for paying off the money you have borrowed. Check how long the interest-free period lasts and aim to pay off a portion of the new debt every month.
While you might end up paying a transfer fee of 4% to switch the money across this could work out much cheaper than an expensive overdraft or payday loan interest.
If you want to withdraw money from your credit card to put into your bank account, this is a relatively low cost and straightforward option compared to setting up a personal loan or borrowing against the value of your house.
However, it does come with some costs. You will most likely be charged a balance transfer fee -typically of about 4% of the total balance. So for a £5,000 transfer, that’s £200.
How much you can transfer from the card depends on your credit limit on your card, and any other terms and conditions. You may want to check first with your credit card provider to see what the extra costs might be. That way, you can compare the cost of a money transfer into your bank account versus the cost of setting up a personal loan.
You will also need to pay the minimum amount each month, otherwise you could lose out on the interest free deal. When you get to the end of the interest free term you will need to shop around for a new card unless you have paid off the full amount you have borrowed. After the 0% interest period ends the cost of borrowing could increase significantly because the interest rate will go up.
After you have made the transfer you will owe the amount you borrowed plus the money transfer fee on the credit card. For example, if you transferred £5,000 with a 4% fee, you will owe £5,200 and will need to meet the minimum monthly repayment until this debt is cleared.
This is how a money transfer credit card works:
* You have a set amount of money which you can borrow on your credit card. That is called your available credit.
* If you need some money you can transfer some of your available credit to your bank account from your money transfer credit card.
* You will be charged a one-off fee for the money transfer which is usually around 4% of the total amount you are transferring.
* When you have made the transfer the debt will show up on your credit card balance. You will be sent a statement each month and you need to pay off the minimum monthly amount as you would with a normal credit card. Pay off more if you can.
* Using a money transfer from your credit card this way will reduce your overall credit allowance until you clear the borrowing.
* It is best to use a money transfer credit card to do this rather than an ordinary credit card, because the charges will be lower.
* There are other, cheaper ways to borrow long-term so only use a money transfer credit card in an emergency and think about how you will pay it back.
Money transfer cards give you a length of time to repay the money at 0% interest in exchange for paying a balance transfer or money transfer fee.
The longer the period of interest-free credit, the higher the transfer fee. So if you want to borrow money from your credit card to pay into your bank account for 12 months, then typically the money transfer fee might be 3%.
If you wanted to have 0% interest rate on the money you have transferred for 24 months, then the fee would be higher, probably around 4%.
We have a guide to help you understand money transfer credit cards and to help you compare the different cards, so you can find the best card for you.
The decision you make on how you borrow money will be based on your personal circumstances, and how much debt you have elsewhere.
However, it can often work out cheaper to transfer money from your credit card in order to raise cash, instead of repaying debt at its current interest rate. This is especially true for overdrafts, which tend to have quite high-interest rates, and payday loans, where the high rates of interest can mean charges rack up very quickly each month. It also depends on how much you need to borrow.
Personal loans can be an option if you want to borrow anything from £5,000 to £20,000. For sums under this amount, an overdraft or credit card transfer might be a better option, if you can pay them off quickly - but don't rule out a small loan. Check the costs and work out what best suits you
Personal loans are usually for a set sum of money and are repaid at a fixed interest rate over a set period of time. They are less flexible than withdrawing a small amount of cash from a credit card and moving it into your bank account.
If you need a larger loan, say £10,000, for a project like home improvement, then you might be better off with a personal loan.
If you are looking to borrow a large amount at a lower interest rate, you might consider a secured loan. This is a loan that is secured against the value of your house.
The other alternative to a money transfer credit card is an overdraft with a current account.
Some of these also have an interest-free buffer (up to a point) and don't require a minimum monthly repayment. The interest-free portion of an overdraft is usually not as generous as the credit limits for money transfer credit cards.
You can withdraw cash using an ordinary credit card but it is very expensive, involves a lot of charges, and is not a good idea except in real emergencies.
Using a credit card to withdraw cash, or buy items considered as cash items, is called a cash advance. Cash advances are one of the most expensive ways to borrow money.
This is because interest is charged from day one, sacrificing your normal 56-day interest-free grace period. Also interest is charged at your card’s full rate - typically about 20%.
There is also likely to be a withdrawal fee on your cash, typically about 2% of the total amount withdrawn.
Interest charges will apply if you use any type of credit card to pay for things that could later be used as cash. For example, buying foreign currency from a bureau de change, or gambling tokens at a casino.
If your current card does not offer a money transfer facility, you can compare and find money transfer cards with Uswitch.
It is worth comparing cards to find the best money transfer credit card for your needs. This will depend on how much money you want to transfer into your bank account, how long you need to borrow the money from your credit card, and how you plan to pay the money back.
If you want the 'best' deal, you should look for a card with the longest 0% interest period and the lowest money transfer fee. However, the transfer fees tend to be lower on cards with shorter 0% periods. So if you think you can repay your debt quicker, it could work out cheaper to choose a money transfer card with a shorter 0% period and lower fee.
It is important to have a plan for repaying the money transfer amount from your credit card after the 0% interest rate period ends.
You can repay more than the minimum monthly repayment each month if you want to clear the balance more quickly.
It is worth aiming to pay off the total debt within the 0% interest period, as money transfer credit cards usually revert to relatively high-interest rates after the introductory 0% period ends.
For example, you might be paying an interest rate of 23% on the outstanding credit balance on your credit card once the 0% period has ended.
For this reason it is important to have a plan to ensure you have paid off the money before the end of the interest free term.
It is best to pay off the amount in full before the 0% term ends. That is because the interest rate on the outstanding loan from your credit card could rise to 23%.
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 lenders 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.
To avoid paying interest, don't spend on your new money transfer credit card, unless it also offers a 0% interest purchase period, or you're sure you can repay your spending in full each month.