Money transfer credit cards allow you to transfer money from your credit card to your current account. They are a fantastic way to cut your interest on existing loans, overdrafts, and in some cases, pay-day loans.
Read our guide to find out how to make the most of money transfers.
If you’re paying a high interest rate on loans or overdrafts, a money transfer card can eliminate your interest payments. It works in a similar way to a balance transfer card: it allows you to transfer existing debts to the card and repay them at 0% interest for a set period of time.
But the crucial difference between a money transfer card and balance transfer card is that the former allows you to transfer cash to your current account to pay off your overdraft or other debts. A balance transfer card, on the other hand, only allows you to transfer debts from one credit card to another. Find out more with our guide to balance transfer cards.
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1. Cut your Interest Bill
With a money transfer card you can stop paying interest on your loans and overdraft. For example, if you had a £5,000 overdraft at 18%, you’d pay £75 a month in interest, or £900 a year. But transferring cash from a money transfer card to your current account to clear the overdraft would mean you’d pay no interest at all.
However, you would have to pay a money transfer fee – a typical fee is 4% which equates to £200 on a £5,000 transfer, leaving you £700 better off over the course of a year.
Even if you won’t be able to clear the debt during the length of the interest-free offer, once it’s on the card you can then move it to a 0% balance transfer deal when the 0% money transfer deal ends.
2. Consolidate your Debts
Streamline your debts and lower your monthly repayments by moving all your loans and overdrafts onto a money transfer card.
For example, you might have a £1,000 overdraft and £2,000 personal loan. If you did a £3,000 money transfer you could repay your overdraft and transfer the rest of the money to repay the loan. Then you’d just need to make one payment each month to repay the credit card – and at 0% interest too.
3. Clear your Debts Quicker
With a 0% interest deal 100% of your repayments will go towards paying off the capital rather than partly towards interest payments. As a result you’ll be repaying your debts more quickly.
You should use a 0% money transfer card if you have other debts you are paying interest on. These could include an overdraft, personal loan or payday loan. Even if you won’t be able to clear the debt during the 0% period you will still be a lot better off, because when the deal runs out you can then switch the debt to a 0% balance transfer card. Just check that what you’ll pay in balance and money transfer fees is less than the interest rate you are currently paying.
For example, if you had a £2,000 overdraft at 16%, you’d pay £320.20 interest a year. Switching this to a money transfer card at 0% for a year and with a 4% fee would cost £80. If the minimum repayment due each month was 3% of the balance, and that’s all you repaid for 12 months, the balance would be £1,443.19 after a year. If you switched this to a balance transfer card charging a balance transfer fee of 3% it would cost £43.30. So, in total you’d have paid £123.30 in fees, £196.90 less than you’d have paid in interest if you’d kept the overdraft.
Anyone can apply for a 0% money transfer card but you may not be accepted. Being rejected is not only annoying, it can also damage your credit rating. But our credit comparison tool eliminates the risk of applying and being rejected. Enter a few details about yourself and our advanced credit matching technology will rank credit cards in order of the ones you’re most likely to be approved for down to those that might reject you.
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Read our guide to credit reportsto find out more.