Most people use their credit cards to make purchases, but did you know that it’s possible to transfer money from a credit card? This can be helpful if you need physical cash or just happen to be facing a cash crunch.
Even though getting cash from your credit card can come with high fees, there are options that may not cost you anything at all. From cash advances to e-Transfers, here’s everything you need to know about transferring money from a credit card.
How Does a Cash Advance Work?
A cash advance is when you withdraw cash from an ATM with your credit card. The process is exactly the same as your debit card. You insert your credit card into the ATM, enter your PIN, and then select the amount of money you want to take out. Note that your cash advance limit is typically much lower than your purchase limit.
While cash advances are convenient for obvious reasons, they can be expensive. Just about every credit card will charge a higher interest rate for cash advances than your regular purchases. You’ll also be charged a one-time fee to use the ATM and interest charges begin immediately with cash advances. Note that you wouldn’t earn any points or cash back on cash advances.
It’s also worth mentioning that using your credit card to pay for lottery tickets, online gambling sites, or to access cash at casinos is also considered a cash advance, so you’d be charged the appropriate fees immediately.
How Does a Balance Transfer Work?
A balance transfer is when you take an existing balance on a credit card and transfer it over to a new or different credit card. The reason you would want to do this is that some credit cards offer a lower promotional interest rate when you perform a balance transfer. For example, a credit card might offer you 0% interest on balance transfers for 10 months. Once the promotional period ends, you’d pay the regular interest rate.
Balance transfers are appealing because they can lower the amount of interest you’re paying. Generally, credit cards charge interest of 20% to 24%, so the benefits of performing a balance transfer are obvious.
It’s worth noting that some credit cards charge a fee for balance transfers. For example, the fee might be 3% of the total amount you’re transferring over. Even though you need to pay a fee, the amount of interest you’ll save is usually worth it.
How does an e-Transfer work?
An e-Transfer is when you send funds from your prepaid card or bank account to someone else via email. When the person who is receiving the funds gets the email from the sender, they can deposit the money directly into their bank account. This is a convenient way for individuals and businesses to send money, as the transfers are often instant.
Most bank accounts allow you to send a few or unlimited e-Transfers for free each month, but they would count toward your monthly transaction limit. There are also some prepaid cards where you can send e-Transfers.
How to Transfer Money from a Credit Card into a Bank Account
Transferring money from a credit card can involve multiple steps, but there are a few ways for you to get funds into your preferred bank account:
Use an ATM. When performing a cash advance, you would need to withdraw money from your credit card. You could then take that cash and deposit it into your bank account via an ATM. Note that you can perform a cash advance from the same ATM where you plan on making the deposit.
Use a teller. Another way to transfer money from a credit card into a bank account is to use a teller during normal banking hours. You would still need to withdraw your funds via a cash advance first, but you could use a live person to deposit the money into your bank account after.
Make an e-Transfer. Some prepaid cards allow you to send e-Transfers with the available funds in your account. The person receiving the money could then deposit the money directly into their bank account.
Make a bill payment. There are a few prepaid and credit cards that allow you to make bill payments. Some available payees are financial institutions.
Is It a Good Idea to Transfer Money From a Credit Card?
Generally speaking, cash advances should only be used in case of an extreme emergency since the fees and interest charged can be quite high. If you need cash, you’d be better off dipping into your savings or even borrowing money from friends and family.
That said, if you’re absolutely desperate for cash, a cash advance is one of the quickest ways to access money. While the fees can be burdensome, there’s no negative impact on your credit history. That said, you’ll want to make sure you pay back the funds as soon as possible, as the added interest could ruin your budget.
When it comes to balance transfers, they can definitely benefit you since you’ll be paying less interest overall. However, balance transfers are typically only allowed when you sign up for a new credit card, and they may come with a small fee. If you’re not taking advantage of the promotional low interest period, you would not be getting ahead.
Does Transferring Money From my Credit Card to my Bank Account Hurt my Credit Score?
When performing a cash advance, there is a potential that your credit score could be affected. That’s because when you do a cash advance, you’re dipping into your available credit. Part of your credit score calculation is based on your credit utilization ratio. That’s how much credit you use relative to how much total credit you can access.
For example, if you did a cash advance for $1,000 and your credit limit is $5,000, your credit utilization ratio is 20%. Generally speaking, you want to keep your utilization ratio at or below 30% to maintain your credit score in good standing.
Can You e-Transfer From a Credit Card?
You can’t make an e-Transfer from a traditional credit card. However, some prepaid cards, such as KOHO, do allow you to send e-Transfers. With prepaid cards, you can only spend what you’ve loaded. With KOHO, sending e-Transfers is free, so you could send money to friends, family, or even yourself. Those funds could then be deposited directly into a bank account.
It’s worth noting that not all prepaid cards allow e-Transfers. Besides free e-Transfers, KOHO users can also earn cash back on purchases and interest on deposits. Since KOHO is a prepaid Mastercard, you can use your card wherever Mastercard is accepted.
The Bottom Line
Transferring money from a credit card is expensive and should only be done if a real emergency arises. If possible, dip into your line of credit or borrow money from friends or family instead. That said, if you have a prepaid card that allows e-Transfers, this is easily the best and cheapest way to access funds from a card.
Barry Choi is an award-winning personal finance and travel expert. He regularly appears on various shows in Canada and the U.S., where he talks about all things money and travel. His website - Money We Have - attracts thousands of visitors daily, looking for the latest stories on travel and money.