What is a money transfer credit card?
A money transfer lets you move money from your credit card to your bank account.
You can use a money transfer credit card to pay off existing debt or borrow money for a purchase. With a 0% deal, you can repay what you owe without paying any interest.
They are similar to balance transfers, which allow you to take out a new credit card to clear the outstanding balance on a credit card you hold already.
As money transfers send the funds to your bank account, they give you more flexibility to use the money however you like. You can use them to:
Clear the balance of an expensive overdraft, personal loan or payday loan.
Fund a large purchase that you could otherwise not use a credit card for, like buying a second hand car.
Used wisely, money transfers can save you money
The longest 0% deals on money transfer credit cards currently last for more than three years.
Many money transfer cards come with a 0% period of a number of months. During this period you will not pay any interest on your credit card, so every repayment you make will go towards clearing the remaining balance.
This means you can clear your debt faster and much cheaper overall than if you continue paying off your existing loan or overdraft.
However, you will still have to pay back the full amount you have borrowed and a money transfer fee.
For example, if you had a personal loan balance of £3,000 at an interest rate of 7.5%, you would pay a total of £3,458.42 if you repaid in full over 36 months (£96.07 per month).
If you shifted the debt to a balance transfer card with a transfer fee of 2%, you would instead pay a total amount of £3,060 if you repaid in full over 36 months (£85 per month). This would save you £398.42 overall.
How to make a money transfer
Use our money transfer credit card comparison to find the card that suits your needs
You can set up the money transfer by completing a form when you apply online, in a branch, by post or by phone
Provide your sort code, account number, the name of your bank and how much you want to transfer
Your new credit card provider will send the funds you have requested to your bank account
You will then owe the amount transferred and the transfer fee on your new credit card
Your new provider will set a credit limit - the maximum you can spend on your credit card without paying a fee or your payment being rejected. Here is an explanation of how credit limits work.
You will not be able to make a money transfer for more than your credit limit, and some providers will only let you use a percentage of it, often around 90%.
For example, if they offered a credit limit of £3,000 and allowed 90% of it for money transfers, you could transfer £2,700.
After your application is accepted, you will usually have a set amount of time to set up the transfer - often around 60 days.
If you do not arrange the transfer as part of the application process, check your provider's time limits and request the transfer as soon as you can online or by phone.
How much money transfers cost
Check the transfer fee
Providers charge a money transfer fee, which can be up to 4% of the balance you are transferring.
Multiply the balance by the fee percentage to work out how much you will pay. For example, if you wanted to transfer £2,000 and there was a 2% balance transfer fee, it would be £40 (£2,000 x 2%).
The amount will be added onto your total balance. In this example, your new balance on the card would be £2,040. The lower the transfer fee, the less you will need to repay.
Look at how long the 0% deal lasts
If you want to pay off the balance in full before the 0% deal ends, make sure you choose a card that offers a long enough interest free period.
When you compare money transfer credit cards, divide your total balance by the number of interest free months to work out how much you would have to pay each month.
For example, if you had a balance of £5,400 to clear over 36 months, your repayments would be £150 a month (£5,400 divided by 36). However, if you needed to repay within 12 months, you would need to pay £450 each month.
You can then choose a credit card deal that offers a long enough 0% period for you to be able to afford the monthly repayments.
If you choose a card with a long enough interest free period that you can afford to pay the balance off in full before the 0% deal ends, you can avoid paying any interest at all.
You can then pick the credit card that comes with the lowest transfer fee to keep your costs as low as possible.
Check for other fees
Credit cards can also come with charges for missing payments, exceeding your credit limit and more. Read this guide to credit card charges for a closer look at what interest and fees may be applied.
Beware early repayment charges on loans
If you want to use a money transfer to pay off a loan, check if you will have to pay an early repayment charge. This is a fee that some loan providers charge if you pay off your loan before the end of its term.
Check your loan's terms or ask your provider to find out how much it will cost, then make sure that the amount you would save by making a money transfer is more than all of the fees you would need to pay.
Use your credit card wisely
Once you have made a money transfer, it is important to use your new card sensibly to make sure the money you have saved is not cancelled out by fees.
Always make at least the minimum payment
You will need to repay at least the minimum amount specified by the provider each month; otherwise you could be hit with late payment charges or even have your 0% deal taken away. Setting up a direct debit will take away the danger of forgetting to make this payment.
This guide explains credit card charges and how minimum payments work.
Pay off the balance before the 0% period ends
If you have not paid off your card before the 0% period ends, you will start to be charged interest on the remaining balance, and the new interest rates will often be higher than most rates.
The easiest way to make sure you pay off the full amount is to divide what you owe by the number of months the card is interest free. For example, to repay £5,400 within 36 months, you would need to pay £150 each month (£5,400 divided by 36).
You can then contact your provider to set up a direct debit to repay that amount each month. This will cut out the danger of forgetting to pay.
Alternatively, you could pay the minimum amount each month and then save up enough money to pay off the full balance before the 0% period ends - you could even earn interest if you use a savings account for this.
You could move the remaining balance to a new credit card that offers an interest free period with a balance transfer.
Although you may have to pay another transfer fee, this could still be much cheaper than paying the interest on your existing card.
Should you use the card after the transfer?
If you spend on your new card you will be charged interest if you do not repay the amount you spend in full every month.
You should also avoid withdrawing cash on a credit card; this guide explains the costs of cash advances.
Everything else you need to know
What are the alternatives to a money transfer?
You could switch your current account to one that offers a free overdraft that comes with no interest charges or other fees.
This could be cheaper than a money transfer credit card because it would not charge a transfer fee.
However, you would need to find one that offers a large enough overdraft that is free for a long enough period for you to repay it before it begins to charge interest or fees.
You should also look out for monthly fees and the requirements for opening the account, such as paying in a minimum amount each month or having a strong credit record.
How will a money transfer affect your credit score?
Your credit record is affected any time you apply for new credit, so applying for a money transfer card will show on your credit history.
The effect depends on how you use the card, the rest of your finances and how a potential lender interprets your credit history. You can find out more by reading this guide to your credit record.
What is stoozing?
Stoozing is named after Stooz, a contributor to a financial website's forum.
You can use money transfers to turn a profit instead of for saving money on existing debts.
Stoozing involves transferring cash from a credit card to a savings account with a high interest rate. You can then make just the minimum payments on the card while it's interest free, then pay off the remaining balance at the end of the term.
This is only worth it if the interest you can earn from the savings account will come to more than the money transfer fee on the credit card. The profit you could make will be the difference between those amounts.
With savings rates currently so low, it can be difficult to find a deal that will let you turn a profit.