What is a money transfer card?
A money transfer credit card allows you to move money from your credit card directly into your current account. There are a few reasons why you might do this. For example, you could be buying second-hand goods from a private seller in person, or paying a contractor. Any funds you transfer would then be added as a balance on your credit card, which you would need to pay off like you would with any other credit card transaction.
How do money transfer credit cards work?
Money transfer credit cards work by allowing you to transfer money from your credit card to a bank account. This is different from a balance transfer credit card, where you transfer the balance (the amount you owe) from one credit card to another.
This is typically how they work:
- You search for a credit card in the usual way. You can use a comparison site or go straight to a bank or credit card provider. Whichever way suits you and gets you the best deals on a money transfer card.
- You can look specifically for money transfer cards in the same way you search for balance transfer credit cards or a card that offers 0% on purchases.
- Once you have found a money transfer credit card, check whether there is an introductory offer that offers 0% interest on transfers. It might also be worth checking if there is a fee to pay for making a money transfer.
- Then, follow the application process. Provide the relevant information as part of the eligibility checks; such as your name, address and other requested information. A “soft” credit check will often be carried out based on this information. This helps a potential lender determine whether they think you’d be able to meet the repayments and stay within your credit limit.
- If you’re happy with what is offered by the lender, you can then submit your application. Be aware that this is the stage in which a “hard” credit check will be performed.
- If your application is successful, you will usually be offered a money transfer card and credit limit with your chosen provider. Be sure to read any fine print and make sure there aren’t any hidden charges or conditions you’re not aware of.
- Money transfers can be fairly quick. On some occasions, you can have the money in your account the same day. This is once your application has been approved.
What are ways to use a money transfer card?
Depending on your circumstances, there are a few situations where a money transfer credit card could work for you:
- You might need to fund a large purchase.
- You could have an unexpected bill to pay.
- You could be doing some home improvements and need to handle any significant upfront payments.
- You may have an emergency and need funds at short notice.
It’s important to carefully consider whether a money transfer credit card is right for you, especially when you factor in any fees or charges you may need to pay. Some cards offer a 0% interest rate for a specific period, but if you’re not able to clear the balance within this period, you’re likely to be charged interest once this period ends.
What are the pros and cons of a money transfer card?
Just like every type of credit card, there are many benefits you can experience when used correctly and some potential implications if not. Here are the pros and cons of owning a money transfer card.
Pros
- They could be used to help pay off existing, higher-interest debts.
- They may be useful in emergencies, for example, topping up a current account for an unexpected bill or direct debit.
- Many money transfer cards offer a temporary 0% interest period when you first take out the card, meaning any initial money transfer made on that card won’t increase with interest.
Cons
- 0% interest rate periods can often be shorter than other types of credit card.
- Money transfer card holders are normally subject to additional fees. It might be worth checking what they are to better understand your card and spend wisely.
- You can be subject to strict terms and conditions, when using your money transfer card, to qualify for your 0% interest free period. However, good money management and tracking your spending can help with this.
Money transfer credit cards: features and points to consider
You might find that there are a lot of money transfer credit cards on offer. Here’s some useful information on features and some points for you to consider:
Features
- Some cards offer a 0% interest rate for transfers made within a specific period.
- You may find a money transfer credit card has a lower interest rate or Annual Percentage Rate (APR) than a personal loan.
- It could be cheaper to use a money transfer card to pay off an overdraft, compared to the interest and other fees charged on the overdraft.
Points to consider
- You may be charged a one-off fee for the transfer by the credit card provider. This is usually a percentage of the amount you’re seeking to transfer or a flat fee.
- Some money transfer cards have a higher rate of interest for purchases.
- Similarly, you may get charged interest and an additional fee for any cash withdrawals. These can also have an impact on your credit file.
- You might find that the credit limit isn’t high enough for the amount you need to borrow.
- Check the card's features, interest and terms carefully before you apply. You'll need to establish whether you can afford to pay off the debts before the 0% period comes to an end or you risk having to pay additional interest.
How to choose a money transfer credit card
It’s important to know all your options when choosing any credit card, and money transfer cards are no different. You may find important differences between the cards offered by different providers. Here are some tips for choosing a money transfer credit card:
- If a card is offering 0% interest on money transfers, make sure to check the date the interest free period expires. You might want to work out how long it would take you to pay off the transfer amount to make sure you don’t get charged interest.
- If you are borrowing to pay off other debts, check the credit limit to make sure it is high enough for your specific needs.
- Most cards will come with a fee for the transfer. It might be worth considering how much this would cost before applying for a card.
- Once you find a card, you might need to do your transfer within a certain period.
- Make sure you’re able to pay back the amount you’re transferring. Only borrow what you need and have a plan for how to repay.
FAQs
How long does a credit card money transfer take?
The time it takes to complete a money transfer from a credit card to a current account varies between banks and credit card providers.
It can take anywhere from being a same-day transfer to within seven days, depending on who you bank with and their timescales.
Can a money transfer credit card affect my credit rating?
Misusing a money transfer card can have an impact on your credit score, like any other card.
Once you’ve transferred money from a credit card to a current account, you need to stay on top of your repayments. You must make sure you make the minimum repayment each month, or this could risk losing your 0% interest-free period. This can also incur additional penalty fees.
Is a money transfer card better than an overdraft?
Both money transfer cards and overdrafts have their advantages and drawbacks. It is down to what you’re comfortable with and your personal preference as to which is more helpful.
However, if you’re committing to a money transfer card, it’s important that you keep on top of your monthly repayments. If managed right, a money transfer credit card can give you a supplemental boost in emergencies, but they come with risks if you overspend or fail to meet repayments.