What are money transfer credit cards?
Want to know how money transfer credit cards work? Here’s what they’re all about.
Estimated read time: 3 mins
What is a money transfer card?
A money transfer credit card allows you to move money from your credit card directly into your current account.
There are a few reasons you might do this – like buying second-hand items from a private seller or paying a contractor directly.
Any money you transfer is added as a balance on your credit card. You’ll need to pay this off like you would with any other credit card transaction.
This is different from a balance transfer credit card, where you transfer the balance (the amount you owe) from one credit card to another.
How do I apply for a money transfer credit card?
This is typically how they work:
When looking at potential money transfer cards, check whether there’s an introductory offer of 0% interest on transfers. It might also be worth checking if there’s a fee for making a money transfer.
Then, it’s time for the application. Firstly, you'll need to provide some basic details as part of the eligibility check, like your name, address and anything else that's asked for. Normally, a ‘soft credit check’ will be done based on this information. This helps a potential lender see whether you’d be able to meet the repayments and stay within your credit limit. Check with the lender to see if they'll carry out a 'soft credit search', as this won’t affect your credit score.
If you’re happy with what’s offered by the lender, you can then submit your application. Be aware this is the stage where the lender will do a ‘hard credit check’ on you.
If your application is successful, you’ll usually be offered a money transfer card and credit limit with your chosen provider. Make sure you read any fine print and check there aren’t any hidden charges or conditions you’re not aware of.
Money transfers can be quick. Sometimes, you can have the money in your account the same day.
What are the ways to use a money transfer card?
Depending on your situation, this is where a money transfer credit card could work for you:
- If you need to make a purchase but the total cost is above your card’s credit limit. You could do a money transfer and then use other savings to pay via your debit card.
- If you need to pay a private seller or contractor in cash for a large purchase.
- If the seller doesn’t take credit cards, but you still want to pay using credit by transferring money to your bank account first.
- You may have an emergency and need money at short notice.
It’s important to carefully consider whether a money transfer credit card is right for you, especially when you factor in any fees or charges you may need to pay.
Some cards offer a 0% interest rate for a set period. But if you don’t clear the balance before that ends, you’ll likely start being charged interest.
What are the pros and cons of a money transfer card?
Like with any credit card, using it responsibly comes with benefits – but there can also be downsides if it’s not managed well. Here are the pros and cons of having a money transfer card.
Pros
- They could be used to help repay existing, higher-interest debts. For example, it could be cheaper to use a money transfer card to pay off an overdraft, compared to the interest and other fees charged on the overdraft.
- They may be useful in emergencies, like topping up a current account for an unexpected bill or Direct Debit.
- Many money transfer cards offer a temporary 0% interest period when you first take out the card. This means that with any initial money transfer made on that card, the amount won’t increase with interest.
- You may find a money transfer credit card has a lower interest rate or Annual Percentage Rate (APR) than a personal loan.
Cons
- The 0% interest periods are often shorter than those offered by other types of credit cards.
- Money transfer card holders normally have to pay additional fees. It might be worth checking what they are to better understand your card and spend wisely.
- There can be stricter terms and conditions when using your money transfer card to qualify for your 0% interest-free period. But good money management and tracking your spending can help with this.
- Purchases made using money transfer funds don’t usually come with the same protections as those paid directly from your credit card. They’re treated more like cash or debit card payments.
How to choose a money transfer credit card
It’s important to know all your options when choosing any credit card and money transfer cards are no different. You may find important differences between the cards offered by different providers. Here are some top tips for choosing a money transfer credit card:
- If a card is offering 0% interest on money transfers, make sure to check the date the interest-free period ends. You might want to work out how long it would take you to pay off the transfer amount to make sure you don’t get charged interest.
- If you’re borrowing to pay off other debts, check the credit limit is high enough for your needs.
- Most cards will come with a fee for the transfer. It might be worth considering how much this would cost before applying for a card.
- Once you find a card, you might need to do your transfer within a certain period.
- Make sure you’re able to pay back the amount you’re transferring. Only borrow what you need and have a plan for how to repay it.
Frequently Asked Questions
How long does a credit card money transfer take?
The time it takes to complete a money transfer from a credit card to a current account varies between banks and credit card providers.
The transfer can take anywhere from the same day to up to seven days, depending on your bank and their processing times.
Can a money transfer credit card affect my credit rating?
Misusing a money transfer card can have an impact on your credit score, like any other card.
Once you’ve transferred money from a credit card to a current account, you need to stay on top of your repayments. Make sure you pay at least the minimum amount each month – missing a payment could mean losing your 0% interest offer and being charged penalty fees.
Is a money transfer card better than an overdraft?
Both money transfer credit cards and overdrafts have their advantages and drawbacks. Which one works best really depends on your situation and what you feel most comfortable with.
if you’re committing to a money transfer card, it’s important to keep on top of your monthly repayments. If managed right, a money transfer credit card can give you a boost in emergencies. But they come with risks if you overspend or fail to meet repayments.