Shift cash from a card to your bank account at 0% interest
A 0% money transfer allows you to shift cash from a card to your bank account to clear your overdraft or give yourself a 0% cash loan for up to 18 months. This guide shows how it works and all the best deals, plus what to do if you can't pay your credit card due to coronavirus.
Who's this guide for? Anyone looking to transfer cash to their bank account and owe a card firm instead. If you've already got card debt, and you want to make it cheaper, you need a balance transfer credit card.
What is a money transfer card?
A money transfer card is a type of credit card that pays cash straight into your bank account. They allow you to borrow at 0% interest for a set amount of time, but charge a fee to do so.
When applying, make sure you ask the lender to transfer the money into your account – DON'T withdraw it as cash. Be aware too that when the 0% period ends, interest kicks in – so to avoid paying this, aim to clear the card before then. Read on for our five golden rules.
You can use a money transfer card to...
Undercut high-street loan rates for big purchases. Even the cheapest high-street loan to borrow £2,000 is about 12% APR. But if you can pay it off in a year and a half, using a money transfer card will cost you just a 2.99% fee. That works out at an APR of around 2.5%.
And like a loan, a money transfer is a good way of paying for something where credit cards won't usually be accepted, such as buying a car.
Pay off expensive overdrafts. Here you effectively shift your overdraft to the card (alternatively, see other ways to cut overdraft costs). When doing this, it's important you're disciplined and don't just drift back into the red, leaving yourself in even more debt. Do a budget so you're in control of your spending.
Pay off nasty payday or other high-interest loans. You could use the money transfer cash to pay off your payday loan. But make sure you then pay off the card – and DON'T take out any more loans. Read our Payday Loans guide for alternatives.
The four golden rules
Money transfers usually mean new borrowing – which can be dangerous. So ensure it's planned, budgeted for and affordable. The best way to handle these debts is to treat them like a loan.
Once you've done the transfer divide the debt by the number of 0% months and pay that amount each month so you clear the card before interest kicks in. It's best to set up a direct debit or standing order to do it.
What can I do if I can't pay off my debt within the 0% period?
Your aim should always be to clear the amount you transferred over during the cheap period, minimising interest.
If that's not possible, your next best bet is to shift the debt to a 0% balance transfer card.
Set up a direct debit for at least the minimum repayment as soon as you're accepted. Even though you pay 0% interest, you still need to make repayments each month. If you miss one, you may lose your 0% deal, get a £12 charge and a missed payment marked on your credit report, which may make it difficult to get other credit.
Aim to pay more than the minimum – unless you've pricey debts elsewhere, in which case focus max repayments on them. Minimum payments are designed to make debts last as long as possible – try to avoid this. See tips to beat this in Danger: Minimum Repayments.
Avoid using your money transfer card to make a purchase or to withdraw cash – you'll likely be charged interest for doing this and taking money out will be recorded on your credit report.
Withdrawing cash on your credit card isn't usually a good idea. Each time you do it, it's recorded on your credit report – and lenders may see it as a sign that you can't manage your finances.
They often think you've withdrawn cash that way because you had no choice as you were in financial dire straits because your bank account was empty.
However, withdrawing cash on your credit card isn't the end for your credit score. If all other accounts are up to date, and you're not maxed out on your cards, then – in isolation – credit card cash withdrawals aren't likely to affect the success of future credit applications. But if you don't need to withdraw cash on your credit cards, it's best not to take the risk.
For more on this, read our mini-guide to withdrawing cash on a credit card, and how it affects your credit record.
Unlike purchases, you normally don't get any interest-free period on cash withdrawals – even if you pay it off in full at your next statement date. You usually pay interest from the date of making the cash withdrawal until it's paid off.
This means you'll most probably see an interest charge on the first statement after the cash withdrawal, which is the interest charged from the date you made the cash withdrawal until the date the statement was issued.
But you may also see interest charged on the following statement. There'll be a delay between your statement being drawn up and you paying it. It may be a couple of days, it may be a couple of weeks. But you'll be charged interest on the cash withdrawal until you pay it off.
There's a catch to watch out for. Some card firms give those with lesser credit histories fewer months at 0% than advertised. You could, say, apply for an 18-month 0% deal, be accepted... but be given 14 months at 0% – sometimes with a higher fee or APR.
We highlight cards that do this by putting 'up to' before their headline offers below.
Lenders tell us they do this based on risk, so if you've got a credit score that only just meets a card provider's minimum criteria, it's likely you'll be accepted for the card, but given a lower number of months at 0%, or a higher APR.
See which money transfer cards you've the best chance of getting, in your own personal best-buy table.
Usually, applying is the only way to know if you'll be accepted for a credit card. Yet that marks your credit file, affecting your ability to get future credit. To help, our tool uses a 'soft search' to find your chances of acceptance before applying.
Check your chance of acceptance
Best 0% money transfer credit cards
|Longest 0% period with the lowest fee, though you may be accepted and offered 14 months at 0%. This card has a 22.9% rep APR. Full info|
|Decent 0% period, though you may be offered 12 or 9 months at 0%. The fee's also quite high. This card has a 19.9% rep APR. Full info|
|Short-ish 0% period that's guaranteed if you're accepted, but with a high fee. This card has a 21.9% rep APR. Full info|
If you're struggling to pay off debt on an existing credit card due to coronavirus, lenders should provide support. What's available depends on whether you've already had help:
• If you've already had payment holidays totalling six months, contact your lender to discuss your options.
Help is still available and will be tailored to your circumstances. You could be offered a (further) payment holiday or a period of reduced payments, reduced interest or a repayment plan – providers should take into account what you can afford and how your finances are likely to change in the near future.
Providers are expected to report any support they give you to credit reference agencies, which could affect your future creditworthiness. Yet don't let that put you off from contacting your provider – missing payments or defaulting is likely to have a far worse impact.
• If you've had no help, or a break from payments less than six months, you can apply for a payment holiday.
Under the latest rules from the Financial Conduct Authority, you can apply for a payment holiday of up to six months if you've not had any help to date, or to 'top up' to a total of six months if you've already had payments paused.
However, you'll still be charged interest, so it's likely to cost you more in the long run. And while these payment holidays won't be reported as missed payments on your credit file, there are other ways for lenders to find out about them. But don't let that put you off from applying for a payment holiday if you really need one – missing payments without agreeing it with your provider first is likely to have a far worse impact.
Money transfers Q&A
It could, but you'll need to be disciplined. Money transfers can be used to pay off expensive overdrafts or payday loans, giving you time to pay off the debt more slowly, and at 0%.
However, your debts may mean that you won't be able to get other cards. To find out, first try our eligibility calculator, which will tell you your chances.
If your odds of getting one of these cards are low, it's likely you need to look at more serious ways to cut costs and sort out your debts. See Money Makeover for how to cut costs on everyday expenses, or Debt Help for where to find help and advice.
Lenders have a wish list and want profitable customers – it's not all about your credit score. If they determine you can't afford the card or you're simply not profitable to them, they may reject you. Read our Credit Scoring guide for a full explanation.
Of course, you should check for errors on your credit report, but hard and fast reasons are difficult to come by. It may be as bizarre as a lender choosing to give credit cards to customers it's more likely to be able to flog a mortgage to.
No. These are totally separate things. Unlike loans, with credit cards, you choose how much you repay each month, though every card has a set minimum monthly repayment. The interest rate is the cost of the debt. For example, a rate of 20% on £1,000 means it costs you £200 per year assuming a constant balance (see our Interest Rates guide for more).
This does mean in some circumstances you may shift debt to a new, cheaper card, but if it has a higher minimum payment, you'll need to pay more each month. Because you might not be able to afford that, ensure you check the minimum repayments before switching.
However, the more you repay, the faster the debt disappears. Especially important is that you try to pay more than the set minimum. For more on that and tips on how to do it, read the Minimum Repayments: Danger! guide.
If it's not high enough to buy what you wanted, or pay your other debt off, just use as much of the limit of the card you've just got as you can. You could always try to get another money transfer card, or look for another way to get the cash.
Clever ways to calculate your finances