What is a money transfer credit card?
A money transfer credit card is a type of credit card that allows you to transfer money from your credit card account to your bank account. They can be a useful alternative to taking out a loan, however providers often charge a fee for these credit cards.
How do money transfer credit cards work?
Money transfer credit cards, like balance transfer cards, let you essentially repurpose your credit limit. However rather than transferring an outstanding balance from one credit account to another, you transfer money on your credit card to a bank account.
This means you’ll have an outstanding balance on your card. Many money transfer credit cards generally have low or 0% interest rates for a given period – however most charge a set fee for making a money transfer instead.
The fee is usually given as a percentage of the amount you transfer, and it will be added to the outstanding balance on your credit card.
The amount you’ll be able to transfer will depend on your own personal finances – you’ll generally only be allowed to transfer a minimum and maximum percentage of your overall credit limit.
Your credit limit is decided by your lender after they examine your credit file, so they can make a decision about how much credit they trust you to borrow.
What should I use a money transfer credit card for?
You can use a money transfer credit card to:
- Pay off an outstanding overdraft on your current account
- Pay back a loan without having to pay interest
- Make purchases at 0% interest, like a normal credit card
Keep in mind that while many money transfer credit cards will also offer low or 0% interest rate for purchase, this may not apply for the same length of time as money or balance transfers.
While transferring money from your credit card to your current account may appear to be similar to withdrawing cash from your credit card using an ATM, it isn’t quite the same. Money transfer credit cards are still likely to have fees and charges in place if you use your card at a cash machine.
Do money transfer credit cards affect my credit rating?
Like all credit products, using a money transfer credit card is likely to have an impact on your credit rating:
- If you use them responsibly and make your repayments on time, you can capitalise on the interest free period and build your credit rating up at the same time
- If you miss or don’t make your minimum repayments it will almost certainly have a negative impact on your score, and you could also possibly lose your 0% interest rate
Things to consider before applying for a money transfer credit card
If you’re thinking about taking out a money transfer credit card, here’s a rundown of thing to consider before you apply:
- Introductory rates: the low or 0% interest rates found on many money transfer credit cards are short-term. When the introductory rate ends you’re likely to be put on the lender’s standard variable rate – which can be much higher. The length of time your low or 0% interest rate lasts will also be different for money transfers and purchases
- Fees: money transfer credit cards, like most credit cards, also carry fees and charges depending on how you use them. There is a set fee for making money transfers, usually a percentage of the amount you’re transferring. There may also be charges for cash withdrawals, using the card abroad, late repayments, and exceeding your credit limit
- Withdrawn benefits: If you go over your credit limit or are late in repaying your balance you may find that your provider withdraws your low or 0% interest rate
- Activation: in order to access the low or 0% interest rate for money transfers, you might have to use the card within a certain time period – sometimes within 60 days of receiving the card
- 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 easier 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 the likelihood of you being approved if you applied for the card. Thanks to MoneySuperMarket’s eligibility checker, you can reduce the risk of having your application for credit refused, keeping your credit report healthier.
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.