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Balance Transfer vs Money Transfer Credit Cards

Balance Transfer vs Money Transfer Credit Cards image

The names are similar and it’s easy to get a little mixed up, but balance transfer credit cards and money transfer credit cards are two different things.

Never fear though! The Money Guru is here to guide you on your journey to financial wisdom.

What is the difference between a balance transfer credit card and a money transfer credit card?

The main difference between a balance transfer card and a money transfer card is that the latter allows you to transfer funds to your current account to cover other debts, such as an overdraft.

A balance transfer credit card however only allows you to transfer a debt from one credit card to another.

What is a balance transfer card?

A balance transfer card allows you to transfer one debt (or part of the debt amount) to another lender. This normally allows you to save money on interest rates or consolidate several existing balances in one place, making the outstanding debt one payment instead of several.

Compare balance transfer cards

When would I use a balance transfer card?

Balance transfer cards are a good solution for those who wish to transfer existing debt to a lower or interest free card for a fixed period in order to clear the balance.

Balance transfer cards are also useful for consolidating several debts on to one card to save money on high interest rates and take better control over finances as there is then only the one monthly repayment instead of several to keep track of.

This gives the consumer greater control over their finances and helps them to keep track of their repayments far more easily than having several outstanding balances with different lenders to juggle every month.

If you are considering applying for a balance transfer card, then the following steps will help you to decide which lender offers the best deal based on your own personal circumstances.

  1. Make a record of all the outstanding balances you wish to clear and note down the interest rates of each and every one.
  2. Use a balance transfer comparison tool to find the best deal available to you.
  3. Use an eligibility calculator to check the likelihood of being accepted for the card you have chosen. 4
  4. Check you are happy with the interest free period as these can vary and ensure that you can afford the repayments otherwise you could end up with greater financial pressure than before.
  5. Apply for the card online or via phone.
  6. Once accepted, make the repayments on time and clear the balance within the interest free period to make the most of the balance transfer.

It’s wise not to use your balance transfer credit cards for spending or withdrawing cash as this will increase your balance and reduce the likelihood of you clearing the debt before the interest free period ends.

What is a money transfer card?

Money transfer cards allow you to transfer funds straight into your current account to cover other expenses, such as your bank overdraft. Some money transfer cards offer 0% interest on the cash transferred for an agreed period of time, although others will charge a fee from day one so do take time to read the fine print.

Dependant on the interest free period offered by the money transfer card you opt for, this could work out cheaper than getting a loan for a major purchase or to pay off an overdraft for example.

However, to make the most of a money transfer card it is best to clear the balance in full during the interest free period. If you don’t, you could face high interest rates later on.

When would I use a money transfer credit card?

Money transfer credit cards are a good option for anyone looking to reduce the amount of interest being paid on existing loans and overdrafts.

If the amount of interest you are paying on your loans and overdrafts is becoming unmanageable and leading to financial difficulties, then now is the ideal time to start searching for an interest free money transfer credit card.

If you are considering applying for a money transfer card, then the following steps will help you to decide which lender offers the best deal based on your own personal circumstances.

  1. Make a record of all loans and overdraft amounts you wish to clear with the card and note down the interest rates being paid currently.
  2. Use an eligibility and comparison tool to find the best deal for you.
  3. Check you are happy with the interest free period on offer (and note down when it ends). Do your sums again to be certain that you can afford the repayments.
  4. Apply for the card online or via phone if the results from the eligibility calculator look good.
  5. Once your application has been accepted, commit to making the monthly repayments on time (or early) and have a budget in place to clear the balance within the interest free period.

Some money transfer card lenders will offer you a shorter interest free term dependant upon your credit score, so it’s best to check that you will be able to clear the balance within this time frame to avoid attracting higher interest rates once the period has come to an end.

Pros and cons of a balance transfer credit card

Knowing whether to choose a money transfer card or balance transfer card can be tricky, so we’ve compiled a short list of pro’s and con’s so you can select the right option for you.

Read on for the pros and cons of opting for a balance transfer card:

Pros Cons
Benefit financially from a lower credit card interest rate, so you can pay off the balance rather than the interest If you don’t get a promotional rate, there’s a chance you could actually end up with an even higher interest rate, which negates the saving entirely
You can move your balance to a credit card with better terms which gives you more financial freedom Balance transfers can get expensive with fees that are easily missed such as the transfer fee and any required annual fees
It’s an easy and convenient way to consolidate debts across multiple credit cards, rather than juggling several cards and repayments every month When you apply for a balance transfer card it will go on your credit score so use an eligibility calculator first

Pros and cons of a money transfer credit card

There are several things to consider before choosing to apply for a money transfer credit card instead of other financial products depending on your individual circumstances.

Find out if a money transfer credit card is the best option for you by looking at our list of pros and cons below:

Pros Cons
A money transfer credit card will give you access to a lower interest rate, so you can make a bigger dent in paying off your debt You could end up with a higher interest rate, so check your eligibility beforehand to keep your finances on track
You can transfer funds straight to your current account so it’s an easy way of paying off bigger loans and pressing overdrafts If you take the money out as cash, you're charged interest and will probably also have to pay a one-off fee, even if you pay it back in full quickly
Money transfer credit cards are usually a lot easier and much quicker to arrange than a sizeable loan from a lender You must pay at least the monthly minimum repayment (if not more) or you could lose the interest free rate and be charged a late repayment fee