Credit cards act as a lifeguard when you need money in a pinch. But sometimes credit cards cannot be used for certain transactions. In such a scenario, you can always transfer money from your credit card to your bank account. Here’s all that you need to know about such a transaction.
We hear about transfers between bank accounts all the time. Less so about transfers between credit cards and bank accounts.
Usually, credit cards are seen as a mode of payment for all types of transactions, against which you earn reward points and cashback. However, you can also transfer money from credit card to bank account.
Transferring Money From a Credit Card to a Bank Account
Normally, credit cards are only used to pay for goods and services and aren’t the prime method of getting money into savings or current accounts.
However, there are certain cases where it’s more convenient to transfer money from a credit card instead of using a traditional bank-to-bank transfer. This could include:
- Money being needed urgently, for example clearing an overdraft
- Wanting to avoid bank transfer fees
- Sending money internationally to a foreign bank account
It’s possible, however, to transfer money straight from your credit card to your or someone else’s bank account, although there are a number of things you should be aware of so you don’t end up paying too much for your transfer in extra fees.
How to Transfer Funds From a Credit Card to a Bank Account
- Note the fees and/or interest rate for your transfer.
- Take out cash or a money order.
- Alternatively, make a wire transfer or a money transfer, or use a credit card convenience check.
- Deposit the money into your bank account, or wait for your transfer to complete.
By taking out cash or a money order, you can make an indirect transfer between your credit card and your bank account. A wire or money transfer can be slightly more convenient, as you can initiate them online.
If your credit card provider allows it, you can also transfer money with a credit card convenience check.
Take Out Cash or a Money Order
If you bring a debit card to an ATM, you can withdraw cash. You can do the same thing with a credit card when you use a cash advance.
Alternatively, you can take out a money order. Find one at your supermarket, a local money-transfer agent, a US Postal Service office or your bank. Money orders can be relatively inexpensive.
Once you’ve obtained cash or a money order, deposit it into your bank account. Many banks allow deposits through ATMs. You may also be able to make your deposit at a branch.
Make a Wire Transfer or Money Transfer
You can make a wire transfer through your bank. Before you do, check if the bank allows credit card payments. You can also consider money-transfer services like Western Union and MoneyGram, which allow you to transfer funds with a credit card.
Wire transfers and money transfers involving credit cards generally come with relatively high fees.
Use a Credit Card Convenience Check
Your card provider may occasionally send you credit card convenience checks.
When you write one, it’s as if you’ve swiped your credit card. The amount you put on the check will be drawn from your credit line — and you have to pay it back eventually.
Carefully read your provider’s fine print before using one of these checks. If you’re lucky, you’ll get a promotional interest rate on it. Otherwise, the check will be treated as a cash advance.
What to Consider Before Transferring Money from a Credit Card
When you transfer money from a credit card to a bank account, your transaction will most likely be coded as a cash advance.
Consider these important points about cash advances:
- You’ll probably pay a cash advance fee.
A common cash advance fee is $10 or 5% of the transaction, whichever is greater. For example, if you take out $500, the fee could be $25.
- Look out for the cash advance APR.
Cash advances usually have higher APRs than purchases or balance transfers.
- Your transaction will start accruing interest immediately.
Unlike purchases, which often have grace periods on interest, cash advances start collecting daily interest right away.
Precautions for Transferring Money from a Credit Card to a Bank Account
Using credit cards to generate credit in your bank account moves away from their intended use, which could cause some unexpected difficulties.
Banks may charge additional fees for transferring money to accounts from credit cards. In addition, defaulting to pay credit card dues after the statement is issued will fetch a fine of 3-4% monthly (or even more) on the outstanding amount.
This will cost much more for transferred money in comparison to acquiring funds in a legitimate way.
1. Should I take out a payday loan?
Many personal finance experts say you should consider payday loans as a last resort. You must repay these loans very quickly, and they usually have sky-high interest rates. Consumers who take out payday loans often find themselves trapped in debt cycles that can snowball.
2. What’s a common cash advance APR?
You’ll commonly see APRs upward of 25% variable. These are very high rates, so avoid them if possible.
3. What is a grace period on interest?
After you credit card billing cycle closes, your card provider will bill you the amount you’ve spent. You’ll typically have a grace period of 21 to 25 days to pay your balance. If you do, the balance won’t incur interest.
You can transfer money from a credit card to a bank account but it might cost you more. Consider the costs you might incur with a cash advance, which likely comes with a higher interest rate and transaction fees.
If you have time, consider the alternatives to a cash advance. You’ll find many reputable services that can help you if you’re in a financial pinch.
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