However, the cash can also be used to cover a major purchase, such as home improvements.
Many money transfer cards offer 0% promotional rates for several months, but be aware you’ll pay a fee for transferring the cash straight into your account.
You’ll also need to have a disciplined approach to using a money transfer card as the interest rate you’ll pay on any outstanding balance will typically jump to around 20% after the interest-free period comes to an end.
So should I use a money transfer to pay off debts?
Getting into more debt to pay off existing debts might not sound wise.
But if you’re disciplined and need cash to pay off an expensive overdraft or payday loan, a money transfer card can be a useful tool to help you clear that debt more cheaply.
Many of the leading cards now offer up to three years’ interest-free.
Should I use a money transfer for a cash injection?
If you’re looking to fund something big, such as home improvements or a new car, a money transfer card can work out cheaper than a personal loan.
Just be sure you can definitely afford to clear your debt before the 0% window ends and interest kicks in.
What are the catches?
You’ll have to pay a fee of up to 4% to transfer the cash to your account. And you’ll usually need to transfer the money within 60 days of opening your account, otherwise you’ll lose out on the interest-free deal and the transfer fee will go up.
You should also pay off the debt before the 0% window ends, otherwise you’ll start to pay interest on your debt. If you know you’re not going to be able to pay off the balance in time you should consider applying for a credit card that offers a low rate of interest for the life of the debt, rather than a 0% deal for a limited period.
Also keep in mind you’ll need a good credit rating to qualify for the best deals. Finally, if you’ve already got a credit card then you may not be able to get another one from the same provider. Always check the terms and conditions thoroughly before applying.
If you’re strict then a money transfer card could help you pay debts off faster
Eligibility Checker for the best card
Our credit card Eligibility Checker estimates the likelihood of being accepted for a credit card without leaving a mark on your report.
All you need to do is enter your details and it will return a list of deals, with an indication of how likely you are to be accepted. This will be on a score out of 10 and colour-coded red, amber and green. The closest to 10 are most likely to accept your application.
Are there any alternatives to money transfer credit cards?
Yes – if you’re paying interest on your overdraft, some current accounts offer interest-free and fee-free overdrafts, so you should consider switching to one of these.
These deals may be limited to just a few months, so if you need longer to pay it off then a money transfer card may be better.
If, on the other hand, you’re looking to make a large purchase, you could consider a 0% purchase credit card.
Although the 0% deals on offer are not quite so competitive (the top deals currently offer more than two years’ interest-free), the advantage is there is no fee to pay. But only go for this option if you know you can clear your debt before the 0% window ends.
If your borrowing needs are fairly substantial, a personal loan might be a better option – and the good news is interest rates are currently very competitive.