Pay off existing debt more cheaply by transferring money from your credit card to your current account with a money transfer credit card.
Money transfer credit cards guide
If you're struggling to pay off an expensive overdraft or loan, borrowing more money to help tackle it might sound a little irresponsible. But some credit cards allow you to carry out what's known as a money transfer and this can offer a great solution for clearing your debt more quickly and more cheaply.
What is a money transfer?
Money transfer credit cards allow you to move available credit from your credit card straight into your current account. You can then use these funds to pay off an overdraft or loan, or pretty much any other form of debt.
Opting for a card that offers an interest-free or low rate money transfer deal will help you to pay off your debt faster and save you a lot in interest.
Cut the cost of debts
Let's say you have an overdraft of £2,500 charging an interest rate of 15%. Applying for a credit card that offers 0% on money transfers for 24 months, for example, will allow you to transfer £2,500 across from your card (if your agreed credit limit permits) into your current account, pay off this debt and pay no interest on it for two years.
Opting for a card that offers an interest-free or low rate money transfer deal will help you to pay off your debt faster and save you a lot in interest
Setting up a monthly direct debit will ensure you never miss a payment – and ensure your 0% deal isn't whipped away from you as a result. Try to pay off more than the minimum each month if you can afford to as this will help you to clear your debt more quickly – and before the interest-free window ends.
Are there any catches?
Similar to balance transfer credit cards, money transfer cards require you to pay a transfer fee. But whereas balance transfer fees are usually around 2% to 3%, money transfer fees are typically 4% of the amount transferred. On a debt of £2,500, that's a costly £100. Also be aware that some card providers require you to carry out your money transfer within 60 days. If you don't, the transfer fee will go up and you will lose out on the interest-free deal.
Be sure to clear your debt before the 0% window ends, otherwise you'll start to pay interest on your debt. If you know you'll struggle to do this, an alternative is to apply for a credit card that offers money transfers at a low rate of interest for the life of the debt. That way, there is no deadline by which you need to have cleared your debt. In addition, you should note that many money transfer cards are offered by MBNA and you won't be able to apply for one of these cards if you already have an MBNA credit card.
Are there any alternatives?
Yes – if you're paying interest on your overdraft, some current accounts offer interest-free and fee-free overdrafts, so it might be worth switching to one of these. But be aware that some deals only last for a few months so if you need longer to tackle your overdraft, a money transfer card could be a better bet.
You can compare money transfer credit cards with MoneySupermarket's free independent comparison service. It's an easy way to find the right card money transfer card for you.
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