Rebecca Goodman
If you have a big overdraft you’re paying for, or you need cash to pay off another debt, a money transfer card might be an option to consider.
They work by giving you money in your current account to use however you want. There is a fee, which is usually a percentage of the amount of money borrowed, and most have a period in which there is no interest to pay.
If you can pay it off within the 0% interest period, you’re effectively getting a free loan, minus the fee for the initial transfer. But before you apply, read on to learn how they work, when you might need one and how to get the best deal.
What is a money transfer card?
When you use a money transfer card, the credit card provider pays money into your bank account, which you can then use as you wish.
You won’t pay any interest on the money for a set period of time, and therefore it can be a good way to pay off more expensive debts or to clear a high overdraft.
How do money transfer cards work?
When you use a transfer card to get money paid into your bank account, there is a fee. This will be a percentage of the amount you have borrowed. So, for example, if the fee is 4% and you move £1,000 over, you will pay £40.
If you pay the money back within the 0% period, which is usually around 12 months, you won’t pay any interest. However, if you don’t manage this you will start paying interest.
Before you accept a new card you’ll be told the interest rate and 0% period, along with any fees. It might be the case the interest rate you are given is higher than that advertised. This is because credit card providers only need to give their advertised rates to 51% of customers, and the actual rate will depend on your credit history.
Many price-comparison sites offer free eligibility checkers to give you an idea what cards you might be eligible for, and the rates available to you. These checkers will not affect your credit score and will give you an indication as to which cards you could apply for.
It’s worth using one of these, as when you apply for any kind of credit your credit history is checked and it leaves a mark on your credit report. If there are lots of applications on there, lenders may think you are struggling with your finances and reject your application.
How can one help and do you need it?
If you decide to take out a money transfer card and can comfortably repay it within the 0% interest period, it can be a good way to pay off other more expensive debts, such as a pricey overdraft.
Again, check a comparison website to find the best card for you. They can quickly show you a range of available cards and most will calculate the costs of making a transfer.
» MORE: How to apply for a credit card
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