How to transfer money from a credit card to a bank account?

How can you transfer money from a credit card to a bank account?

The most popular ways to send money from a credit card to a bank account are:

1. A cash transfer
2. A money transfer credit card
3. A cash advance (withdrawal) at the ATM
4. Sending money by PayPal

If you have a positive balance because you have received a refund from a retailer onto your credit card, you can transfer this to your bank account. Use your online credit card account or call your credit card provider. Transferring refunded money is normally free.

What is a money transfer?

A money transfer is when you transfer funds from a credit card directly to a bank account. It is a type of wire transfer.

What are the rules about money transfers?

Different credit cards will have different terms and conditions about money transfers – check these before going ahead. Typical terms include:

• You can only send money to a UK current account in your name.
• You can’t send money to a savings account or overseas account.
• The minimum amount is £100.
• You must pay a money transfer (MT) fee, typically about 4% of the amount transferred.
• There’s a cap on the money transfer amount, normally 95% of your credit limit.
• A ‘cash advance’ interest rate will apply.
• Only the primary cardholder can initiate a money transfer.

Money transfer credit card

A money transfer credit card is designed to allow you to borrow cash on your credit card and pay it into your bank account.

Once the transfer has been made, you will owe the money to the credit card company.

What is a money transfer card?

A specialist money transfer credit card allows you to borrow cash from your credit card and benefit from an introductory 0% interest rate.

A money transfer credit card works a bit like a ‘balance transfer’ credit card but instead of the money paying off existing credit card debt, it is transferred to your bank account.

The idea is you transfer the cash to your current account to pay off an overdraft or other debts such as loans. By doing so, you can pay less interest on this borrowing.

New rules bought in by the Financial Conduct Authority (FCA) in 2020 simplified overdraft changes but mean most UK banks charge overdrafts at 40% APR (annual percentage rate).

Using a credit card with a 0% APR promotional offer on money transfers to pay off your overdraft could save you money if you repay the credit card debt within the promotional period.

How much will it cost?

Most money transfer cards charge a money transfer (MT) fee.

The money transfer fee is quoted as a percentage of the debt you transfer, with a minimum cash amount – for example, “4% with a minimum of £5”. If you transferred £1,000 of debt, a 4% MT fee would mean you pay £40. This would bring the total you owe to £1,040.

For most cards, the 0% period is only reserved for money transfers that are made within the first 60 or 90 days of opening the account. After this, any transfers would incur interest at the card's normal rate, until paid off in full.

After any 0% promotional offer has ended, you will be charged interest on any debt you still have to repay. This might be at a different interest rate to the one charged on purchases or balance transfers.

How much money can I move across?

Most money transfer cards have a minimum amount you can transfer, normally £100. They also have a maximum that will be a proportion of your credit limit. This is typically 93% or 95%.

Benefits of using a money transfer card

The key benefits of a money transfer card are:

• To reduce interest on debts (for example, if you use a 0% money transfer card to pay off a 40% APR overdraft)
• You can borrow money from your credit card to make a purchase even when credit cards are not accepted
• Flexibility, as you can effectively use your credit card as cash

Impact on credit score

Using a money transfer credit card could have a positive or negative impact on your credit score, depending on how you use it.

Your credit score might go up if you:

• Make regular payments to the money transfer card to pay the debt
• Show you can handle credit responsibly
• Use the cash from a money transfer card to pay off other debts

Your credit score might go down if you:

• Exceed your credit limit
• Don’t make the minimum payment each month
• Have other debts that, combined, will mean you have a high credit utilisation ratio

How to use a money transfer card

If you use a money transfer card to pay off other debts, it will work like this:

1. Log in to your credit card account (or call your credit card provider if you don’t have online banking).
2. Select the credit card you want to transfer from and check the option to request a money transfer.
3. Request the fund transfer you want to make. Your card provider will state the maximum amount you can transfer.
4. Provide details of the current account you want to transfer to. Usually this account will need to be a UK current account in your name
5. Your credit card provider will confirm the transfer fee.
6. You will need to accept the terms and conditions to complete the request.
7. Your provider will approve the request. This might involve extra security checks.
8. The money will be transferred to your current account. This is normally done by the next working day.
9. You now owe the credit card firm the amount transferred plus the money transfer fee. For example, if you transferred £1,000 of debt, a 4% MT fee would mean you now owed £1,040.
10. You can use the money how you choose. This might be to pay off an overdraft or loan, for debit card purchases, or as a cash withdrawal from an ATM.
11. Make at least the minimum repayment each month. You can set up a direct debit to do this. Paying more than the minimum will mean you clear the debt quicker.

Cash advance

A credit card cash advance is when you use your credit card to withdraw cash from an ATM.

What is a cash advance?

A cash advance is an ATM withdrawal using your credit card.

Credit card cash advances normally have a higher interest rate than purchases, balance transfers and money transfers. Interest is also charged from the date of the transaction. This is different to purchases, where you normally get up to 58 days before interest is applied.

Credit card firms normally class various other types of transaction as a cash advance too. These include:

• Making a mortgage payment
• Paying a utility bill
• Buying foreign currency
• Purchasing gift vouchers
• Online gambling transactions
• Making an electronic cash transfer

How would I get cash into my bank account?

You can use your credit card to withdraw cash from an ATM, then deposit it in your bank account.

How much could it cost to withdraw money?

Using your credit card for a cash advance or cash withdrawal can be expensive.

You’ll normally be charged daily interest from the moment you take out the money until you pay off the balance. If you have a 0% interest deal on purchases or balance transfers, the 0% won’t apply to cash withdrawals.

You may also be charged a cash advance fee. If you take the money out abroad, additional foreign transaction fees might also apply.

Benefits and drawbacks of using a cash advance

The following table shows the pros and cons of cash advances.

Using your credit card to send money to PayPal

You can use your credit card to send money to PayPal. You can also set your credit card to be your default payment method on PayPal.

If you use your credit card on PayPal you won’t be charged a cash advance fee for sending money for goods or services. For payments made as gifts or to friends and family, there’s a fee that the sender can either pay or opt to have the receiver pay.

Bear in mind that if you use your credit card to pay for something via PayPal you won’t benefit from protection under section 75 of the Consumer Credit Act. This clause says if you pay for something costing between £100 and £30,000 on a credit card, the card company is jointly liable with the retailer if anything goes wrong.

But for section 75 to apply there needs to be a ‘direct link’ between the card holder, the credit card company and the supplier. Using PayPal breaks this link, so section 75 does not apply.

Is it a good idea to transfer money from a credit card?

It can be a good idea to transfer money from a credit card to your bank account to pay off other debts if your credit card has a cheaper interest rate.

However, it might not be a good idea if you then borrow more money and run up more debts.

Can transferring money from a credit card affect my credit score?

Transferring money from a credit card can have a negative impact on your credit score. This might be the case if you borrow close to your credit limit or increase your credit utilisation ratio above 25%. It will also affect your credit score if you miss monthly payments.

Money transfers might have a positive impact on your credit score if you use them to show you can handle credit responsibly. This means making regular repayments and paying off other debts more quickly.

Summary – Transferring money from a credit card to a bank account

There are several ways you can transfer money from a credit card to a bank account. Using a 0% interest money transfer card can be a cheap way to pay off more expensive debts such as overdrafts and loans.

But if you don’t have a 0% APR promotion offer on money transfers, interest rates can be high.

Cash advances on credit cards should only be used in emergencies as they carry higher interest rates than other transactions, and also suggest to lenders that you are in financial distress.