What is a Money Transfer Credit Card?
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.
Lets lay bare the important facts about money transfer credit cards...
How do money transfer credit cards work?
- Similar to a balance transfer card
- Transfer existing debts
- Pay interest-free for set period
When you apply for a money transfer card, if accepted, you’ll be given a credit limit and perhaps a period of interest free or lower rate borrowing to adhere to. You’ll often need to make the transfer within a certain number of days after opening the card in order to qualify for the offer.
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 generally be asked to pay a transfer fee which can vary, but is usually somewhere between 3 to 4%.
Why money transfer cards can be cost effective
Even the wisest among us can sometimes lose our way when it comes to credit, so if you’ve got an overdraft you’re paying off that you’d like to clear more cheaply, a money transfer may be the solution. You could also use the funds to pay extra 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.
If you want to clear credit card debt, look at a 0% balance transfer card instead.
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. Things can quickly start to spiral out of control.
Purchase interest rates
Purchase interest rates on these cards are unlikely to be 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 or other 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.