Money transfer credit cards explained

At a glance

• Money transfer credit cards allow you to transfer cash from your credit card to your current account.
• They normally come with a fee, but some have 0% interest periods.
• They can be a cost-effective way to borrow, provided you pay them off before the 0% deal ends.

Whether you’re looking to make a large cash purchase or pay off debt on an overdraft, a money transfer credit card could be an option. But just what is this type of credit, and should you consider it?

Here we explain what a money transfer credit card is and what you need to look for when opting for this form of borrowing.

What is a money transfer card?

A money transfer card allows you to transfer cash from your credit card to your current account, which essentially means you’re borrowing money from your credit card. There are specialist money transfer credit cards (also called cash transfer credit cards) available, as well as "all round" cards that offer money transfers, alongside other features.

Some offer 0% interest periods too, which means it could be a cost-effective way to borrow cash, but there will likely be fees to pay that should always be factored in.

What can money transfer cards be used for?

The money borrowed from this type of card can be used for whatever you wish, but it’s typically used for things like paying off an overdraft, or using it as a type of loan:

• Overdraft. If you’ve overspent on your current account and suddenly find yourself facing large overdraft charges, you could use a money transfer credit card to pay it off. In this sense it acts as a form of debt consolidation, and it could be used for other forms of short-term debt too.
• Cash loan. Withdrawing cash from an ordinary credit card can be expensive, so if you need to make a large cash purchase, it could be more cost-effective to arrange a money transfer instead. This works much like a typical loan but, thanks to 0% interest rates, could be far cheaper, provided you pay off the amount before interest charges kick in.
• Stoozing. Some people may like to use a money transfer to benefit from stoozing, which is where you put this 0% cash into a savings account to earn interest on it. However, it’s important to work out if this will be worthwhile after any fees have been taken into account, and you need to make sure you can pay off the amount you borrowed before interest is applied.

How do credit card money transfers work?

Credit card money transfers work by transferring money from your credit card straight into your current account, in return for a one-off fee. The money will typically be transferred within one working day, but this depends on your provider.

You may be charged interest on this amount, or your credit card may offer a 0% interest period for a limited time, so make sure to check what kind of deals are available.

There are no restrictions on what you can use the money for but you’ll still be expected to pay it back, much like with any other credit card – you’ll have a minimum monthly payment to make, and if you’ve got a 0% deal it’s recommended to repay the amount in full before interest charges apply.

Remember to always use the proper money transfer process – never withdraw the money as cash and pay it into your bank account yourself. This will incur hefty cash withdrawal charges, and you won’t benefit from any interest-free deals either.

What’s the difference between balance transfers and money transfers?

Money transfer credit cards are not to be confused with balance transfer credit cards. Balance transfer cards allow you to move your credit card balance to a different one with an interest-free period, which can be a cost-effective way to repay the debt.

How much do money transfer cards cost?

Money transfer credit cards almost certainly carry one-off fees, which will likely be a percentage of the money transferred to your bank account. This is usually between 3% and 5%, but it can vary, and some cards don't charge a fee for this at all.

It’s also important to consider the interest rate. While some will have a 0% deal, not all do – and even if you benefit from this kind of offer, make sure you know the rate that you could revert to, so you can work out what your future interest charges could be.

Do money transfers affect your credit score?

Money transfers can affect your credit score in the same way as any other form of credit, in that they’ll only impact it if you don’t manage it effectively. This means that if you don’t keep up with the repayments it can damage your score, and it can also have an impact if you apply for too many in a short space of time.

Conversely, managing it well – making at least the minimum payment each month, and ideally more – can have the opposite effect, and can show future lenders that you’re a responsible borrower.

Alternatives to money transfer credit cards

Money transfer credit cards can be beneficial if used wisely, but they won’t be for everyone. Here are a few alternatives you may want to consider:

Overdraft

If you only want a bit of a financial buffer, opting for a current account with an overdraft could be sufficient. This will give you the peace of mind that you’ll have credit available should you need it, and provided you’re able to pay it back, it needn’t be that expensive.

0% purchase card

If you want to make a large purchase but don’t need to pay in cash, opting for a 0% purchase card could be a more suitable alternative.

This means you won’t have any transfer fees to pay so – provided you repay the balance in full before the interest-free period ends – it could be an entirely free method of borrowing, and you’ll benefit from the additional security of paying with a credit card too (read our guide on the Consumer Credit Act to find out more).

Personal loan

A personal loan can be more suitable if you need to borrow a larger amount of money, or you’d rather have the security of payment instalments that will ensure the amount is fully paid back after a set period. This means, assuming you make your repayments, you will know with certainty how much it will cost. Use our loan calculator to work out the estimated cost of a loan.

Looking for an alternative to a money transfer card? You can see if you're eligible for a personal loan (without affecting your credit score) with our preferred broker Loans Warehouse.