How do money transfer credit cards work?

What is a money transfer card?

A money transfer card Link opens in a new window is a unique type of credit card that allows you to deposit money directly into your current account Link opens in a new window. Once the money hits your account, you can spend it any way you like - whether it’s for a well-deserved holiday or for paying off debt on your new car.

These nifty little cards also are really useful for a number of different scenarios - such as unexpected breakages in the house or car, last-minute holidays or extra spending that you haven’t necessarily budgeted for. When beginning to pay off a repayment, you can easily set up a Direct Debit from your money transfer card to your current account Link opens in a new window, so that you can reallocate your money responsibly.

Designed specifically for transferring funds with ease, having a money transfer card can make moving money a lot simpler. Depending on which money transfer card you opt for, you’ll have the option to move the majority of your credit card limit over to your current account Link opens in a new window - for example, with our Virgin Money credit card Link opens in a new window, you can move up to 95% of it.

What should I consider when using a money transfer card?

Though money transfer cards are a lifesaver in a number of ways, it is important to think about whether getting one is the right decision for you. Ask yourself what you should be wary of and what you need from it. Will you save money in the long run? What is the standard interest rate after your promotional period ends? Does your existing lender charge an early repayment fee?

We’ve pulled together a few foolproof steps to take before considering a money transfer card, that should help you eliminate any obstacles that might stand in your way:

• Before going ahead and spending the sterling, check your money transfer card’s rate beforehand and refrain from withdrawing money from a cashpoint - you may be shocked by the rate.

• It’s probable that you’ll have to complete the money transfer within the first 3 months in order to get the 0% and the fee, so we would suggest planning your timings prior to beginning your repayment.

• You need to repay the monthly minimum amount. If you don’t, your provider will likely stop your promotional rate and charge a default fee. Why not set up a direct debit for the monthly minimum amount to help avoid this happening? It’ll also help you keep on top of your repayments without getting snowed under by a huge sum at a later date!

• Finally, we advise that you clear your debts before the 0% comes to an end, otherwise you will start paying interest at your standard contract rate on any remaining balances.

Should I withdraw cash with my credit card?

The short answer is no. Though it is, of course, possible to withdraw cash with your credit card, we would highly recommend that you don’t. Not only could doing so have an irreparable impact on your credit record and the success of your future credit applications, but it’s also an expensive decision to make.

When it comes to withdrawing money with your credit card, it can be extremely easy to land yourself in a sticky situation - and fast - if you don’t research a little beforehand. Annie, a 26-year-old from Glasgow, made the mistake of withdrawing cash from her credit card without properly considering the risks.

She divulged: “I previously took out cash from my credit card when renovating our bathroom. I called my credit card provider beforehand and asked them what the fees would be to take out cash, however, I didn’t realise there would be a cash interest charge on top of the fees until after I had already taken the cash out. An extremely silly move on my end led to me jeopardising my spotless credit rating. It was really frustrating, as I could have easily done a money transfer and avoided it! Trust me, it definitely pays to be clued up on these things!”

That’s right, you’ll be subject to not one, but two charges every single time you withdraw cash with your credit card: a cash advance fee, which is often a percentage of the sum you take out or a fixed fee, and a daily interest fee, which charges you interest on the amount you withdraw until you pay back the cash. A pretty costly move, right?

Should I consider a loan?

If you’re not quite decided on a money transfer card Link opens in a new window and you’d like to avoid withdrawing money from your credit card (wise move), then, of course, there are loan options available. Whether it’s dipping into an arranged overdraft or physically applying for a loan from your bank, getting a loan isn’t out of the question, depending on your financial situation.

Saying that, we wouldn’t advise you to jump into the decision of taking out a loan without properly analysing the risks. However simple they may seem; some loans can expose you to potentially securing your borrowing against your family home or car. Money comes and goes, but there are some things it can’t buy back!

We urge you to talk to our financial advisors for more information before making any rash decisions and to do some thorough research before calling the shots.