A complete guide to money transfer credit cards
In this guide we take a look at money transfer credit cards. We explain what a money transfer credit card is, when you might consider one and reveal the current top 3 money transfer credit card deals.
What is a money transfer credit card?
A money transfer card is a type of credit card that allows you to transfer money from your credit card into your bank account. You can then use these funds to help pay off debts such as an overdraft or use it as a low-cost loan to make a purchase.
Similar to balance transfer cards, some money transfer credit cards come with an introductory 0% period for a number of months, allowing you to avoid paying interest during that time.
Be aware, however, you will usually need to carry out your money transfer within a set time, ie. 60 days, to qualify for the 0% offer, and you will need to pay a transfer fee. Fees are usually a percentage of the total amount - typically around the 4% mark - and will be added to your balance.
How do money transfer credit cards work?
Money transfer credit cards work by allowing you to transfer money from your card into your bank account. The amount you can transfer will depend on your financial situation and credit score. It will usually be a percentage of your overall credit limit which will be decided by your card provider.
Once you’ve carried out your money transfer, you make monthly payments to your credit card provider, just as you would with any other credit card.
Don’t be tempted to withdraw money from your credit card - known as a cash advance - instead of transferring the funds as this can be expensive. You will be charged interest from the date you make the withdrawal and interest rates on cash advances can be high - often in the region of 25% APR. You’ll usually have to pay a fee too.
Withdrawing cash on a credit card will also be recorded on your credit report.
What is a money transfer credit card used for?
You can use a money transfer credit card to help pay off existing debts, such as an overdraft, store card or a loan. You will then owe money to the credit card provider rather than the bank or lender.
Alternatively, you can use a money transfer card to help pay for unexpected bills or to make a cash purchase. It is best not to use the credit card itself for purchases as there may not be a 0% introductory offer on purchases, or if there is it is unlikely to be competitive.
Do money transfer credit cards affect your credit rating?
Using a money transfer credit card can affect your credit rating in the same way as any other credit card. If you are late with repayments or miss them completely, this can leave a mark on your credit file and negatively affect your credit score. Missing a payment can also result in you losing your 0% offer.
On the flipside, however, if you use your money transfer card sensibly and make your repayments on time, this can have a positive effect on your credit score and show lenders you are a responsible borrower.
What is the difference between a money transfer and a balance transfer credit card?
With a balance transfer credit card, you can move existing card balances across and, if the card has a 0% introductory offer, avoid paying interest on that debt for a number of months. You will usually have to pay a transfer fee and also carry out your transfers within a certain time.
Money transfer cards, on the other hand, allow you to move money from the card into your bank account, and you can then use the funds for whatever you need. Like balance transfer cards, you can benefit from 0% introductory offers, but they are usually slightly shorter than the top 0% balance transfer deals.
You will also have to pay a transfer fee with a money transfer card and these are usually higher than for balance transfers. Fees are typically around 4% rather than the 2-3% that is common with balance transfers. Money transfers usually need to be carried out within the same timeframe as balance transfers.
Can money transfer credit cards save you money?
If you are paying a high rate of interest on an overdraft, personal loan, payday loan or store card, using a 0% money transfer card will you give you a break from paying interest for a number of months. This can save you a tidy sum of money, even when you factor in the transfer fee, and it could help you to clear your debt more quickly.
As an example, let’s say you had £2,000 on a store card charging 29.9% APR. If you paid off £100 a month, you would pay £665 in interest and it would take you two years and three months to clear the card.
Instead, you might decide to use a money transfer card to pay off the £2,000 store card debt. If the money transfer card offered 0% for 28 months with a 4% fee, you would pay £80 for the fee and, if you kept your repayments at £100 a month, you would pay no interest. That’s a saving of £585 and you would clear the debt within one year and nine months.
Things to consider before getting a money transfer credit card
Before applying for a 0% money transfer credit card, it is worth taking some time to consider the following:
- What do you need the card for? Are you paying off existing debts, or are you using it for a new purchase? If you’re planning to use it for a purchase, is it something you could live without?
- Do you know what the transfer fee is and is there a time limit for making transfers? It’s important to factor this in before applying.
- Can you afford the monthly repayments? If you are taking advantage of a 0% offer, it is a good idea to divide the amount borrowed by the number of 0% months, and pay off this amount each month. This will help ensure you have cleared your balance before the 0% period ends and you start paying interest.
- If you can’t clear your balance before the 0% deal ends, do you know how much interest you will be charged? Interest rates can be high so you may want to transfer your remaining balance to a 0% balance transfer card instead.
- Have you checked your credit score? A good score increases the chances of being accepted for the top deals.
Money transfer credit card vs Personal loan
Money transfer credit cards can be a useful tool for helping you to pay off small debts of up to around £5,000. If you choose a card with an interest-free deal, this can help you to pay off expensive debts more cheaply and in a shorter amount of time.
Interest-free money transfer cards can also be a cheap way to fund purchases, but it’s important to try and pay off the amount borrowed before the 0% offer ends, otherwise it can rapidly become an expensive way to borrow.
If you’re planning a larger purchase, you may find the credit limit on a money transfer card isn’t high enough and it can be more cost-effective to use a personal loan.
Interest rates on personal loans can be competitive and you will have the option of being able to repay the loan over up to seven years in some cases (keep in mind you will pay more interest if you have a longer loan term). Payments are also fixed which can make budgeting easier.
You can read more about credit cards and personal loans in our article: Is it better to get a credit card or personal loan?
The best money transfer credit cards
The table below shows our top three deals on 0% money transfer credit cards.
|Provider||Interest-free period||Transfer fee||APR (after interest-free period)||Small print||Minimum payment|
|Tesco Bank||Up to 28 months*||3.94%||21.8% to 30.5%*||Transfers should be made within the first 90 days||Greater of £25 or 1% of balance|
|MBNA||Up to 24 months*||2.99%*||22.9% or 27.9%*||Transfers should be made within the first 60 days||Greater of £25 or 1% of balance|
|Virgin Money||23 months||4%||23.90%||Transfers should be made within the first 60 days||Greater of £25 or 1% of balance|
*Dependent on personal circumstances of the applicant
- 0% on money transfers for up to 28 months. Depending on your circumstances, you may be offered 22 or 16 months
- 0% only applies to money transfers made in the first 90 days of account opening
3.94% fee for transfers made in the first 90 days, 3.99% thereafter
- Interest rate of 21.8% to 30.5% APR after interest-free period, depending on your personal circumstances.
- 0% on money transfers for 24 or 16 months, depending on your individual circumstances
- 0% only applies to money transfers made in the first 60 days of account opening
2.99% fee or 3.49% fee for transfers made in the first 60 days
- Interest rate of 22.9% or 27.9% APR after interest-free period, depending on your personal circumstances.
- 0% on money transfers for 23 months
- 0% only applies to money transfers made in the first 60 days of account opening
4% fee for transfers made in the first 60 days, 5% thereafter
- Interest rate of 23.9% APR after interest-free period.
The Tesco Bank credit card offers the longest 0% money transfer deal at 28 months, but it also has one of the highest fees. What’s more, if you are accepted for this card, depending on your credit rating, you may be offered a shorter 0% period of 22 or 16 months.
The MBNA credit card, meanwhile, offers a slightly shorter 0% deal at 24 months - although you may be offered 16 months - but it has a lower transfer fee at 2.99%. This could work out to be the cheaper option if you can pay off your balance in a shorter amount of time.
Finally, the Virgin Money money transfer card has the shortest 0% offer of the three cards, at 23 months, but has the advantage that if you are accepted, you are guaranteed to get 23 months interest-free.
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