What is a money transfer credit card?
Money transfer credit cards pay money into your current account, and some even charge 0% interest for an agreed period – though there’s usually a fee to pay. So if you need a low-cost loan to make a major purchase or pay off debts, they are worth considering.
How do money transfer credit cards work?
Money transfer credit cards are similar to balance transfer cards, but instead of transferring an outstanding balance between credit cards, you transfer money from your credit card to your bank account. People usually do this to pay off an overdraft or another debt.
Many money transfer credit cards offer low or zero interest for a given period, though there’ll often be a fee for making the transfer. This is usually a percentage of the total amount, and it’ll be added to the outstanding balance on your credit card.
For example, if the fee is 4% and you transfer £1,000, £40 will be added to your credit card balance, for a total repayment of £1,040.
The amount you’ll be able to transfer will depend on your financial situation – it will usually be given as a percentage of your overall credit limit. Your credit limit is decided by your lender after it examines your credit file.
Once you have an outstanding debt on your money transfer credit card, you will need to make at least the minimum repayment each month – which will be indicated on your credit card statement.
If you fail to make this minimum repayment you will be charged late fees, and the zero-interest offer will probably be cancelled. Missing your minimum payments may also affect your credit score.
What should I use a money transfer credit card for?
Money transfers cards are normally used to pay off other non-credit card debts, such as:
- An overdraft on your current account
- A personal loan
- Payday loans
- Store credit
If you need to pay off existing credit card debts, you’ll be better off with a balance transfer credit card.
Keep in mind that while many money transfer credit cards will also offer a low or zero-interest rate for purchases, this may not apply for the same length of time as money transfers or balance transfers.
When you receive your money transfer credit card, make sure the money you need is transferred to your current account. Don’t use the card to withdraw cash from an ATM, which will involve high fees and interest charges.
Do money transfer credit cards affect my credit rating?
Like all credit products, a money transfer credit card is likely to have an impact on your credit rating. Here’s why:
- Lenders who check your credit record will see that you have this line of credit available to you, which may affect how much they will lend you
- If you use money transfer cards responsibly and make your repayments on time, using the card may have a positive impact on your credit rating
- If you miss the minimum repayment on your card each month, there will almost certainly be a negative effect on your credit score. Late payments could also mean you lose your zero-interest rate
Should I get a money transfer credit card?
Here’s what you should consider before applying for a money transfer credit card:
- The zero-interest period: The zero-interest period on a money transfer card may be shorter than that for balance transfers or purchases. Make sure you know when it ends, as you’ll likely be put on the lender’s standard rate – which is often much higher
- The money transfer fee: There is very likely to be a fee for transferring a debt to a money transfer credit card, normally 3% or 4% of the balance transferred. Take this fee into account when comparing money transfer credit cards
- Time limits for transfers: Most cards require you to make a money transfer within 60 days of opening the account in order to get the zero-interest applied
- Other fees: There may also be charges for cash withdrawals, using the card abroad, late repayments and exceeding your credit limit. It’s best to avoid these things with a money transfer credit card – if you’re travelling abroad, use a credit card with no extra fees for foreign spending
- Minimum repayments: You’ll need to make at least the minimum repayment each month. If you fail to do so, the lender is likely to cancel the zero-interest rate
- Credit limit: This is the maximum amount you can borrow on the card. If your borrowing exceeds this figure, you’re likely to be charged a penalty fee and your zero-interest rate may be cancelled
- Consumer credit: Keep in mind that as with all credit cards, any purchases you make between £100 and £30,000 are protected under Section 75 of the Consumer Credit Act
Compare credit cards with MoneySuperMarket
If you’re looking for a credit card, comparing deals on MoneySuperMarket is an easy way to find a card that’s right for you. All you need to do is tell us a little about yourself, your financial status, and what you’d like to use your new credit card for, and we’ll show you a list of cards tailored to your needs.
You’ll be able to sort them by their interest rates, any included incentives and your likelihood of you being approved. Thanks to MoneySuperMarket’s eligibility checker, you can reduce the risk of having your application for credit refused.
Once you’ve found the card you want, just click through to the provider to finalise your application. If it’s accepted, your provider will send you the card through the post as well as letting you know your credit limit and interest rate – remember the advertised rate may not be the one you get, as it only has to be offered to 51% of successful applicants.
Once you have your card, you just need to activate it and it will be ready to use.
MoneySuperMarket is a credit broker not a lender. You must be 18 or over and a UK resident.
