What is a Money Transfer Credit Card?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
25th October 2021
2 minute read
Not to be confused with their similarly named counterparts (balance transfer cards), a money transfer card allows you to borrow money on a credit card by paying a lump sum directly into your bank account.
You can then use this cash as a loan or as a way of clearing an existing overdraft. Many money transfer cards come with zero interest periods, so as long you pay all of the money back within the agreed timeframe, you don’t pay interest on the borrowing.
However, to do this type of borrowing right, there are a few rules to follow. Let’s find out the important facts about money transfer credit cards.
How do money transfer credit cards work?
- Often included as a feature of balance transfer cards
- Transfer money to pay off existing debts
- Pay interest-free for set period
Money transfer cards work by allowing you to transfer funds to other accounts, in order to clear an existing balance or debt. You are then given a set period of interest-free borrowing where you can pay off the total amount. If this introductory period expires, you will then be charged interest on top of the outstanding balance that is left to pay.
You’ll also need to make payments on time each month and stay within your credit limit or risk losing that rate. Usually providers cap how much of your limit you can transfer at around 80-90%. You’ll sometimes be asked to pay a transfer fee which can vary, but is usually somewhere between 3-4%.
Why money transfer cards can be cost effective
Even the wisest among us can sometimes lose our way when it comes to credit. If you’re currently paying off an overdraft that you’d like to clear more cheaply, a money transfer might be the solution. You could also use the funds to pay off other debts like personal loans as long as doing so does not incur overpayment or early repayment charges that wipe out the savings made.
A money transfer card can give you a little extra space to breathe. By effectively getting a loan at a cheaper rate you can pay for other things too, such as goods and services you can’t pay for by credit card.
As always, never borrow more than you need. Work out how much you’ll need to pay off each month to clear the debt before a higher rate of interest kicks in and be strict about not slipping back into your overdraft or other borrowing. Doing so could leave you feeling uncomfortable and your finances stretched. Before you apply, have a read of getting your first credit card with confidence to understand what your commitment is when borrowing money.
Purchase interest rates
Purchase interest rates on these cards are not always as attractive as the transfer rate, so steer clear of spending on the card unless you have secured a 0% interest purchase period. Also, make sure you have a plan on how you’ll clear the debt before you start paying interest. Like other credit cards, never withdraw cash on a money transfer card – you’ll likely incur fees and high interest if you do, as well as potentially harming your credit score.
Check which card you're eligible for
Use our moneymatcher tool and we’ll conjure up deals tailored to your requirements. It’ll also highlight product comparisons such as the overall cost of borrowing, transfer fees and any handy features such as cashback, rewards or interest-free periods.
Don’t forget that you won’t always get the representative APR which need only be open to 51% of those accepted for the product. This means that if you’re accepted for a money transfer card deal you may also be asked to pay a higher transfer fee or given a shorter interest free or introductory rate period.