Money transfer credit cards

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What is a money transfer credit card?

A money transfer credit card is different to a standard credit card in that it lets you transfer money into your bank account. There’s often a money transfer fee (this varies depending on the provider), but many offer 0% interest on the outstanding balance for an agreed period. After that period ends, interest will be charged on any outstanding debt.

Once you’ve transferred the money into your account, you can use it as you wish – to reduce an overdraft or debt, as well as cover any other expenses or make a purchase.

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We understand that the outbreak of coronavirus (COVID-19) has caused financial difficulty for some of you. If you have a credit card and you’re worried about making repayments due to coronavirus, we’re here to help you understand the options available.

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How do money transfer credit cards work?

A money transfer credit card is a good option if you need cash but don’t want to take out a loan. But, like any other credit card, you’ll first need your application to be approved. You usually need to have a good credit score to be eligible for a money transfer credit card.

A transfer fee of around 1% to 4% will be added to your repayment, so remember to factor this into your calculations before deciding to transfer.

Look for a money transfer card with an extended interest-free period. This means you won’t have to pay any interest on your repayments, so long as you pay the money back in full within this time period. If you don’t pay it back before this period ends, you’ll be charged interest on what you owe.

Moving money between your money transfer credit card and your current account can be a useful way of managing short-term debts. However, you should always have a plan of how to repay the money you borrow, before you decide to transfer.

What are the best ways to use a money transfer credit card?

You could use a money transfer credit card to make a cash-only purchase or pay off an existing debt – for example, an overdraft or a loan – to save on interest payments.

For example, if you’re accepted for a £3,000 money transfer card, you could potentially use this money to pay off £1,000 from an existing loan, £1,000 of any overdraft you might have and also make a high-value cash purchase.

You can also use a money transfer credit card to pay off existing high-interest loan debt, if your credit card rate is lower than that of your original loan. Just be careful, as the debt will then sit with the card instead, so you’ll still need to pay off what you owe, but you could owe it on a lower rate.

On the other side, you could use a money transfer card instead of some of the more expensive loan rates you might find. You’ll normally have less time to pay off the debt, but it could save you a lot in interest compared to the high-street lenders and banks, so it’s worth looking.

As with all credit cards, you should apply for one only if you can financially manage the debt – ideally clearing the outstanding balance before the end of the interest-free period. Also avoid making multiple applications for cards as this can damage your credit rating if you’re rejected. You can find out what cards you’re likely to be accepted for before you apply by using our credit card eligibility check.

Use our credit card eligibility check

Can I use a money transfer card to transfer to a bank account?

Yes, you can transfer money to your bank account using a money transfer card. This can be useful to pay off an overdraft. However, it doesn’t necessarily have to be to pay off a debt. You could transfer money into your account, before then spending or withdrawing cash using a debit card.

However, the purpose of these types of cards is to help you pay off existing debts, not get into new ones, so you should always be careful before using a credit card. Once you’ve used a money transfer card to pay into your bank account, the debt sits with that card, and you’ll need to meet the minimum monthly repayments to pay off the amount you owe, or risk getting into further debt.

Should I get a money transfer credit card?

It depends on your financial situation, and everyone’s is different. Here are some of the pros and cons for getting a money transfer credit card.

PROS:

  • Useful for paying off existing higher-interest debts and loans
  • Can be used as a substitute for higher-cost loans
  • Can get a zero-interest period

CONS:

  • The zero-interest period will likely be shorter than with other types of credit card
  • You’ll normally be charged fees for using your card in various ways. These can vary, so look out for them when comparing money transfer credit cards
  • You’ll need to meet the minimum repayment amounts each month, or risk losing your 0% rate.
  • You’ll normally have limits on both the amount you can borrow on the card, as well as the period you can borrow it for, before you lose any 0% rate.

As we said earlier, you should be really careful when taking on a credit card or any other debt. Make sure you know about any of the limits and extra fees you might be charged, and what you need to do to keep that 0% interest rate. Finally, you should always have a plan to pay off the amount you’ll owe, including when it will be completely repaid.

How can I find out if I am eligible for a money transfer credit card?

Not everyone is eligible for a transfer credit card. Lenders will want to be sure that you have a good credit rating and be able to affordably pay back what you transfer.

Use our credit card eligibility check to find out if it’s worth applying for a transfer credit card. Our eligibility checker won’t carry out a hard credit check on you, so you don’t need to worry about it impacting your credit score or leaving a mark on your credit history. Instead, we can help you compare credit cards that we think you’ll be eligible for, meaning you can get a good idea of what’s out there for you, including the interest rates, additional fees and any credit limits.

Once you’ve got an idea of what you’re likely to be eligible for, you can then go ahead with a proper application, confident that you’re likely to be accepted.

Use our credit card eligibility check

Frequently asked questions

What’s the difference between a money transfer card and a balance transfer card?

A money transfer card allows you to transfer borrowed cash into your current account, while a balance transfer card only allows you to transfer debts from one credit card to another.

Balance transfer cards can be useful because you can move debt from one credit card that’s charging you a high interest rate, to a lower or even 0% interest credit card. This makes it useful for debt consolidation, creating just one pot of debt that could be easier and cheaper to manage. Meanwhile, a money transfer card is simply used to transfer money from a card to your bank, in order to pay off a debt like an overdraft.

What do I need to think about when I get a money transfer credit card?

As with all types of borrowing, it’s important to think about how much you want to transfer and have a plan in place for paying it back. This will help you find a card with an interest-free repayment period that suits your needs.

Also, be mindful of the transfer fee. You’ll need to factor this into your repayment plan so you don’t overstretch yourself.

Finally, you should always be careful when taking on any form of debt. Be aware of any limits and added charges, as well as the terms and conditions. You should also have a plan ready to pay off the amount you’ll owe, a target of when to be fully repaid.

Do money transfer credit cards affect my credit rating?

A money transfer credit card is a credit product, which means you’ll need to face a credit check when applying, which will leave a mark on your credit history, and, depending on whether you’re accepted or not, could impact your credit score.

If you use your card effectively, meeting all of your repayments and staying within your credit limits, you could see your credit rating improve. Although, if you fail to do this, it could just as easily get worse. So, as always, be careful when using any type of credit product.

Will a money transfer credit card help me if I am in debt?

A money transfer credit card can help you with debt. If you’re struggling with a high-interest overdraft, you can transfer money using your card to your bank account and cover the amount you owe.

Just remember that the debt then lies on the card, and so you’ll still have to pay off what you owe. However, if you can keep within your card’s limits, and keep up with your minimum monthly repayments, you could benefit from a 0% interest rate, which can help you manage your debt more easily.

Can I use this card to withdraw cash from an ATM?

You could use a money transfer credit card to withdraw from an ATM, but that’s not what they’re really for. You could also transfer money from your card to your account, before withdrawing it using your debit card, but both of these will incur extra charges. If you’re looking for a credit card that can help you access cash, you should consider a specific cash advance credit card.

How can a money transfer card potentially save me money?

Once the money is in your bank account, a money transfer card can help you pay off debt by saving you interest, so you can make a bigger dent in the actual sum borrowed.

Using a simple example, if you have a debt of £2,000 and the APR on that debt is 15%, this will cost £25 a month (or £300 a year) in addition to what you already owe.

With a money transfer card, however, while you might pay a one-off fee of, say, 4% – £80 on a loan of £2,000 – you could pay off the outstanding balance with no additional interest. But you’d need to make sure you can pay off the balance before the 0% period ends, and make at least the minimum payment each month.

What is APR?

The annual percentage rate (APR) represents the yearly rate of interest you pay for borrowing money, via credit cards or loans. Generally speaking, a low APR indicates lower interest rates and lower associated fees.

How long do money transfers take?

The time it takes for money to transfer to your account after you’ve been accepted for a card will depend on your provider. Some lenders offer instant transfers, while you may have to wait a few days with others.

Should I get a personal loan or a money transfer card?

A money transfer card could be cheaper than taking out a personal loan because the transfer fee, combined with a 0% interest free period, could mean you pay back less interest overall.

Also, the flexibility of being able to pay back the entire amount at any time (as opposed to fixed monthly loan payments with potential charges for overpayment) could be a good option for you.

However, you need to take into account that if you don't clear what you owe during the 0% period, you’re likely to end up paying a much higher APR than many personal loan rates.

What will I need to watch out for?

If you’re considering a money transfer card, there’s a few things to watch out for:

  • The money transfer fee is around 4% of the amount you transfer, so check the actual percentage on the card you’re considering and take this cost into account when comparing.
  • If you withdraw the cash instead of transferring it straight to your account, you might be charged extra for making the transaction.
  • You may not always get the headline deal, even if you’re accepted. Up to half (51%) of those that apply receive the headline deal, depending on their circumstances.

Anelda Knoesen

Money product expert

What our expert says...

"Used sensibly, money transfer cards can be a useful way of avoiding paying interest on overdrafts or loans attached to your bank account. However, they can also lead to charges if you fail to pay back the money within the interest-free period. Make sure you only transfer an amount you know you can pay back."