What is a 0% money transfer credit card?
A money transfer card is a credit card which allows you to transfer cash to your current account from your credit card. A 0% money transfer card is one that offers that transfer possibility combined with an interest-free introductory period on the cash that you’ve transferred. This type of card is a useful financial tool if you need to pay off an overdraft or a payday loan or if you need to pay for something that can’t be charged on a credit card. If managed correctly, this can be one of the cheapest forms of borrowing.
It’s not hard to see why a money transfer card can be appealing. But it’s not the best tool for all situations. If you want to avoid interest on purchases that you can make on a credit card, a 0% purchases credit card may serve you better. And if you are looking to pay down existing credit card debt, a balance transfer card is likely a better option.
How we picked the best money transfer deals
Personal circumstances differ, so what may be a great card for one person, may not be for someone else. Here at MyWalletHero we look to provide ratings and top picks that will suit the average reader. When considering a credit card, it is best to think about your own situation and how well the card will suit you. We’ll cover all of that in a little bit.
But in the meantime, here are the top features we look at when selecting out list for the best money transfer cards:
- Length of the 0% introductory APR for money transfers – This is obviously a key consideration for a money transfer card. Once you have transferred the money over to your current account, it is your responsibility to pay down the balance. The aim is to do this before your interest-free introductory period ends, so that you don’t incur any new interest charges. The longer the interest-free period, the longer you have to do this.
- Money transfer fee – Most money transfer cards carry a fee for making the transfer. This is an upfront fee that you pay when moving the money across, and it is taken as a percentage of the amount of funds that you are transferring. Money transfer fees typically range from between 2% to 4%, however, there are some cards available which have no fee attached. We have a preference for cards with a low, or no fee, that will keep your overall costs down.
- Representative APR for the card after the introductory period – Knowing the representative APR of the card is very important, as this is the interest rate you will be charged if you fail to pay off your balance during your introductory period. Obviously, the ideal scenario is that you won’t have any outstanding debt by the time the card reverts to its standard interest rate, but it is good to avoid sky-high APRs just in case this doesn’t happen.
- Transfer window – This is the period of time in which you can make your transfer and still achieve the interest-free offer. These transfer windows can range from 30 days to 90 days. Obviously, the longer the transfer window, the greater flexibility you have.
- Other fees, including cash advance fees and non-sterling transaction fees – It’s not just the money transfer fee that you need to consider. Cards often carry cash advance fee (a charge for withdrawing cash using your credit card) and non-sterling transaction fees (fees you pay when paying in a foreign currency). If the card does carry a cash advance fee, then it would be advisable to avoid withdrawing money using your credit card. With non-sterling transaction fees, if you travel a lot, this could be a good reason to get a travel credit card to take with you when you go abroad.
- Rewards, cashback and other perks – While rewards and perks may not be the top thing on your mind when comparing money transfer cards, it doesn’t hurt to look. If you could achieve a 0% money transfer offer and rewards or cashback, we think that’s an even better deal.
The scores take all these factors into account, and we update our ratings as new cards come onto the market or changes are made to existing cards. So it’s always a good idea to check back now and again.
Comparing money transfer cards
So, we have covered the key elements of a money transfer card but we now need to take a look at those features a bit closer in order to help you decide which is the best fit for you.
- The length of the introductory period – This is one of the major factors to consider when comparing money transfer cards as the main reason for getting a card like this is the 0% period. It is easy to fall into the trap that the longer the interest-free period, the better the card, but this is not always the case. Sometimes you can have a shorter interest-free period, but achieve a lower transfer fee. It is best to look at the combination of the offer and also consider how long it is that you need to pay down your balance. There are not as many money transfer cards on the market as say, balance transfer cards, so you may struggle with choice.
- Money transfer fee – Next to the length of the introductory period, the money transfer fee is the most important thing to consider. This is essentially the upfront cost of making the transfer. In abstract, 4% may not seem a lot, but in reality, if you are transferring a balance of £1,000, you will need to pay £40 in fees. It goes without saying, the larger the amount you transfer over, the bigger that initial cost will be. However, if you are looking to pay off debt which has a much higher interest rate, it would still be beneficial to make the money transfer and absorb the fee. Just when you are comparing cards, look for ones that have fees that are on the lower end of the market.
- The card’s standard APR – Once your promotional period ends, you’ll start accruing interest at the card’s standard APR. A typical APR is around 19%, which means that any debt you have left remaining will be charged at this higher rate. While it is the goal to pay off the balance before the end of the interest-free period, it is still worth looking for a card with a low standard APR just in case you don’t keep up with your repayment plan. However, if you are absolutely sure that you won’t have any debt left once the 0% period is over, then the standard APR matters a bit less.
- Rewards and other perks – If everything else is equal, then it makes sense to have a card that rewards you for your spending rather than not, right? It goes without saying that you should keep at the front of your mind the reason you are looking for a card in the first place — 0% money transfer deal — but if you do find yourself comparing cards which have similar 0% periods and similar money transfer fees, why not choose one with a few extra perks.
How does a money transfer card work?
All in all, a money transfer card is a very simple process. In effect, your credit card company pays money into your current account from your credit card. You then have a sum of money in your bank account to do what you like with, and a balance on your credit card which you will need to pay off.
With most money transfer cards you will have a window of 60 or 90 days to make your transfer once the card is active. Be sure to note how long your transfer window is, as what you don’t want to be doing is taking out a money transfer card and then missing out on the 0% promotional period.
How to use a money transfer card
A money transfer card can be one of the cheapest forms of borrowing, if used correctly. Essentially you are getting an interest-free loan which you can then use towards paying off other debt or paying for a purchase you cannot put on your credit card.
Money transfers are typically used for paying off overdrafts, personal loans or payday loans. One thing to avoid doing with a money transfer card is withdrawing cash, as credit cards typically charge high fees or high interest rates for doing this. Additionally, if you are looking to pay off credit card debt, then you will likely be better off with a balance transfer card rather than a money transfer card.
A key thing to remember is to borrow only what you need. Don’t be tempted to run up lots of debt on unnecessary spending, as it will all need to be paid off in the end. Also, ensure you make your monthly minimum payments. If you fail to do so, you could lose your promotional rate and be charged penalty fees by your provider.
What’s the catch?
A money transfer credit card can be a good financial tool — if used correctly (I know, I’ve said that already, but it can’t be stressed enough!). Therefore, it is worth knowing about the risks involved with this sort of borrowing.
Firstly, most money transfer cards carry a fee. As mentioned above, this can be anything between 2% and 4% of the amount you are transferring. So if you transfer a total of £5,000 and your card had a transfer fee of 4%, you would have to pay £200 in fees. This amount should be part of your calculations as to whether you can afford to take out this sort of card.
Secondly, even if you manage to obtain a long interest-free promotional period, it will end at some point. One of the biggest risks of taking out a card like this is having a balance left over at the end of the introductory period, as the card will revert to its standard APR. It is wise to work out a repayment plan once you have made your transfer and stick to it to ensure that you pay your balance in full by the end of the promotional period. Failure to do so could result in you incurring high interest charges on any outstanding debt.
Thirdly, the amount you are able to transfer is dependent on your credit limit. Lenders will typically allow you to transfer between 90% and 100% of your limit, but what your limit is depends on your personal financial situation and your credit score. If you have a specific amount you need in mind, then you may be disappointed if your credit limit comes in below it.
Finally, it is imperative that you keep up with your minimum monthly payments. If you miss any payments — and with some cards this only has to happen once — you could lose your 0% offer and interest on any remaining balance will be charged at the card’s standard APR.
Is a money transfer offer right for you?
A money transfer card is not for everyone, and it is something that does need to be used correctly for you to feel its benefits.
Here is a checklist of three statements. If you can say ‘yes’ to all three, then you may be a good candidate for a money transfer credit card:
- You have existing debt in the form of an overdraft, personal loan or payday loan. Or you need to make a large purchase which cannot be put on a standard credit card.
- You are serious about paying your balance off in full.
- You won’t overspend on your credit card, adding to the existing debt.
The pitfall with a card like this is that you spend the funds in your current account, but fail to pay off your credit card balance. This runs the risk of your promotional period running out, and your balance being charged at a high standard APR, which would leave you in a much worse financial situation.
However, if you are diligent and committed, do your research and keep to your repayment schedule, then a money transfer card can be a great way to achieve an interest-free loan.
FAQs about money transfer cards
What is a money transfer?
It’s when you transfer money from a credit card to your current account, ideally using a 0% promotional period.
What is a money transfer credit card?
When we refer to a ‘money transfer credit card’, we are talking about a credit card which provides you with a 0% promotional rate on a balance that you have transferred to your bank account. The length of the interest-free period depends on which card you take out. Note that some credit cards provide the option to do a money transfer, even though they don’t offer a 0% introductory period.
How does a money transfer work?
When you are approved for a money transfer offer, and provide information to your credit card provider on how much you want to transfer and to which account, your lender will pay that money into your account and you will be required to pay back that amount to them.
How long does a money transfer take?
This will depend on your provider. Some transfers are made immediately after your application is accepted, while some take a few days.
What is a money transfer fee?
This is a fee that you often have to pay when making a transfer. A money transfer fee typically ranges between 2% and 4%.
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