The Benefits Of Money Transfer Credit Cards

What is a money transfer credit card?

By Matt Fernell, Editor-in-Chief at Last updated 15th February 2023.

Matt Fernell

A money transfer card is a type of credit card you can use to move cash into your personal bank account for a one-off fee. Here’s everything you need to know about how they work.

How do money transfer credit cards work?

A money transfer credit card works by allowing you to transfer most of its credit limit into your current account as cash. You then repay the balance of the credit, often at 0% interest, for the first 6 to 12 months. 

When you have been approved for a money transfer card, you need to request the transfer by providing the details of the bank account you want to transfer to. You will also need to specify how much you want to transfer.

Money transfer cards usually let you move up to 95% of your credit card limit. Therefore, you need to make sure that you get a card with a credit limit that is more than the amount you need to transfer.

Once the money is transferred into your current account, it can be used to make purchases, pay bills, clear your overdraft, pay off debt, or withdraw cash.

You must make minimum monthly payments to keep your any interest-free introductory period you’re offered. The interest rate will increase to a standard APR of around 24% when it expires.

How to do a money transfer

Here’s how the process of making a money transfer works: 

  1. Set up the transfer: When you’re first approved for your card, let the card provider know you want to make a money transfer. You'll have one to three months to complete your transaction to take advantage of any introductory interest-free period. 

  2. Pay the fee: Once the transfer goes through, you'll be charged a transaction fee ranging between 1 and 4% of the total amount transferred. For example, if you move £1,500 and are charged a 3% fee, you'll have to pay £45. 

  3. Work out your repayments: Calculate how much you need to pay back each month to clear the card before the 0% period ends. For example, if you have a balance of £1,545 (amount transferred plus the fee) and 12 months interest-free, you’ll need to repay £128.75 each month.

  4. Set up your repayments: Set up a direct debit to make your monthly payments. Ensure you cover at least the minimum payment required, or you could lose your 0% deal and be charged a fee. You can make one-off payments anytime on top of any direct debits you set up.

How can a money transfer card save me money?

You can save with a money transfer credit card by using it to pay off a more expensive debt, like a personal loan or an overdraft. For example:

  • You have an outstanding debt of £2,000 with an APR (annual percentage rate) of 15%, which means £300 will be added in interest over a year

  • You get a money transfer credit card to clear the debt with a 12-month 0% period and a transfer fee of 4%

  • The cost of the transfer would be £80, leaving a total debt of £2,080

  • If you pay this off within the 12-month interest-free period, you will have saved at least £220 in interest

To make sure you save money using a money transfer credit card, you need to pay off the balance in full by the end of the interest-free period. If you don’t, any balance left will start earning interest, often at a higher rate than a personal loan or overdraft.

How much does a money transfer card cost?

A money transfer can save you money by enabling you to clear expensive debts, but there are potential costs you should be aware of.

When you first carry out a transfer, you'll have to pay a small percentage of the amount. This is known as a money transfer fee and can be up to 5%. 

Like most other cards, there are additional fees you’ll have to pay for things like:

  • Missing a payment

  • Making a late payment

  • Paying less than the minimum payment amount

  • Using the card to withdraw cash from an ATM

  • Using the card to spend money abroad

  • Transferring to a non-UK bank account

It’s also important to know that you may earn interest on any balance used for purchases or balance transfers. Unless the card includes interest-free periods for purchases and balance transfers, the 0% deal will only apply to credit you use for money transfers.

All-rounder credit cards can offer 0% deals for money transfers, balance transfers and purchases. These provide extra flexibility, but you will need a good credit record to be eligible, and they may not offer the best deals compared to specialist money transfer cards. 

What's the difference between a money transfer and a balance transfer card?

A balance transfer card is where you transfer the balance you owe on one card to another. This is usually used to move a balance accruing interest to another card with either a lower interest rate or an interest-free period. 

A money transfer card moves money from a credit card into your bank account. The funds can then be withdrawn or used as cash to clear other debts or pay someone who doesn’t accept credit cards.

What happens at the end of the interest–free period?

When your 0% introductory period ends, your card will start to charge you interest on any remaining balance unless you pay it off in full.

If you still have an outstanding balance when your interest-free period ends, you can use a balance transfer credit card to move the debt onto another card. 

This can give you another interest-free period to pay off the balance. However, you will need to pay a balance transfer fee, so make sure this is less than any interest you would accrue. 

How to manage a money transfer credit card

Here are some tips to get the most from your money transfer credit card:

  • Make sure you pay off the balance before the end of the 0% period

  • Set up a direct deposit to make sure you don’t miss a payment

  • Work out how much you need to repay each month to repay the debt by the end of the interest-free period

  • Providers rarely let you know when your introductory offer is coming to an end, so set up a reminder so you can act before you start earning interest

  • If you can’t clear the balance in time, apply for a balance transfer card rather than pay interest on your current card

  • Only use the card for money transfers unless it offers 0% on purchases or balance transfers as well

  • Avoid missing a payment, as this could mean your introductory offer is withdrawn, and you will start earning interest

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.