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Comparing credit cards | Protection and rights offered with credit cards

How to transfer money from a credit card to a debit card

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.

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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.

Money transfer cards 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 repaying a debt at its current interest rate, especially overdrafts which tend to have quite high interest rates.

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 your bank account

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. Using a credit card to withdraw cash, or buy items considered as cash items, is called a cash advance.

However, cash advances are best avoided as they are one of the most expensive ways to borrow money. Card providers charge daily interest from the moment you make a cash advance until it is fully paid back, and also charge fees every time you take out cash with your credit card.

For example, if you were to use a credit card to withdraw cash from a cash machine, you would usually be charged a fee of around 2%, even if the cash machine you were using said it was ‘free’.

Also the ‘cash advance’ APR (typically between 20-30%) applies from the moment you withdraw the cash and is charged daily until you pay back the sum of money you’ve withdrawn.

The same fees and interest charges will apply if you use your 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 you do want to transfer money from your credit card to your debit card, a money transfer credit card will help you avoid paying excess interest and penalty fees.

How to choose a money transfer credit card

If your current card doesn’t offer a money transfer facility, you can compare and find money transfer cards with uSwitch.

If you want the ‘best’ deal, you’ll likely want to aim to get the 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.

How to use a money transfer credit card

Once you have your money transfer card you can transfer credit into your bank account. Once the money is your bank account you can spend it via debit card or withdraw it as cash from a free ATM at no extra charge.

After you’ve 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.

You can repay more than the minimum monthly repayment and it’s 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.

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 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 can repay your spending in full each month.

Alternatives to money transfer credit cards

The most obvious alternative to a money transfer credit card is an overdraft with a current account.

Many of these are also interest free (up to a point) and don’t require a minimum monthly repayment. But whether this a good choice for you depends on how much you want to borrow, as the interest free portion of an overdraft is usually not as generous as the credit limits for money transfer credit cards.

Be careful and do your research as some overdraft charges can be extremely expensive.

Read more…

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Compare money transfer cards

Find a credit card that will let you transfer money into your current account.

Compare cards