You can repay a loan or overdraft by moving money from a credit card to your bank account. You'll then owe the credit card provider rather than the loan lender or bank. Here’s what you need to know.
Money transfer credit cards work in a different way to standard credit cards. They let you move money from your credit card into a bank account so that you can then use these funds to pay off an expensive debt or borrow money for a purchase.
For example, you could use a money transfer to:
Pay off an overdraft, personal loan or payday loan
Fund a large purchase, like buying a new car
If you choose a money transfer card with a 0% deal, you can repay what you owe without paying any interest for a set number of months. This can make it a much cheaper way to borrow, but you should aim to clear your balance before the 0% deal ends and interest kicks in.
Money transfer credit cards typically let you transfer around 90% to 95% of your credit limit.
Always compare money transfer credit cards before you apply to make sure you get the best deal.
When you carry out a money transfer, you’ll usually need to pay a transfer fee. This can be up to 4% of the balance you are transferring.
For example, if you want to transfer £2,000 and there's a 3% balance transfer fee, the fee would be £60. This would make your credit card balance £2,060.
The interest you pay in addition to a money transfer fee depends on whether or not you have a 0% deal.
If you have a 0% deal, you will not pay any interest on the amount you transfer until the interest-free offer expires - the best deals last for up to 18 months.
Once the 0% deal ends, you’ll start to be charged interest on the remaining balance. This could be anywhere between 18.9% and 25.9% APR.
If your card doesn’t have a 0% deal, you’ll be charged interest from the start. How much you’ll be charged will depend on the provider and your credit rating.
Money transfer credit cards can be a good choice for anyone paying a high rate of interest on existing debts such as a personal loan or overdraft. They could also be a good option for anyone looking for a low-cost loan to cover an unexpected bill or other expenses.
However, to qualify for a money transfer credit card, particularly one offering a lengthy 0% deal, you will need to have a good credit score. If your credit score isn’t up to scratch, your application could be rejected or you might have to pay a higher interest rate and cope with a smaller credit limit.
For this reason, it is sensible to use our eligibility checker before applying for a card. This will show you which money transfer cards you’re most likely to get accepted for without hurting your credit score.
When comparing money transfer credit cards, it’s important to check the length of the 0% window to ensure you’d be able to pay off the debt in full before the 0% deal came to an end.
For example, if you had a balance of £3,600 and a 0% deal that lasted 18 months, you'd need to pay £200 per month to clear the debt in time.
The shorter the 0% deal, the higher your monthly repayments will be. Make sure you choose a credit card that offers a long enough 0% period so you can afford the monthly repayments.
In addition, you should be mindful of transfer fees as these can vary from card to card. Be sure to factor this into your repayment plan. Check too whether there is a set time in which you need to carry out your transfer. Many money transfer cards will require you to make your transfer in 60 or 90 days to qualify for the 0% deal.
Finally, if you get accepted for a money transfer card, it’s a good idea to set up a monthly direct debit for your monthly repayment amount. This will ensure you don’t miss a payment one month which could affect your credit file and result in a fee being charged.