The best money transfer credit cards
Are you paying painfully high interest on your overdraft? A money transfer credit card could cut your interest rate to zero.
Overdrafts on current accounts can be painfully expensive.
Some accounts charge £5 a day for going into the red and even with an authorised overdraft, it can cost as much as 19% in interest.
One way to get rid of your overdraft is to use a money transfer credit card. These work by letting you transfer money from your credit card to your current account. Once you’ve transferred the money, you can use it to pay off your overdraft.
Credit card companies usually charge very high rates of interest on this sort of cash advance, higher than you would pay with most overdrafts.
However, there are a few cards that allow you to transfer money from your card at 0% interest. In other words, these cards allow you to do a 0% money transfer.
This is very similar to a 0% balance transfer. There are only two differences:
1. You’re transferring money from a card to a bank account, instead of transferring a debt from a card to another card.
2. The fee is often higher for a money transfer than for a balance transfer. Money transfer fees are usually around 4% whereas balance transfer fees are typically between 1.5 and 3%.
The top cards
Once you’ve taken out either of the cards, you have 60 days to do a 0% money transfer. So if you have a £2,000 overdraft, you could transfer that sum from your card to your current account and you wouldn’t have to pay any interest during the 0% period.
The other crucial point is that if you haven’t paid off the resulting debt within the 24 months, you’ll then start paying interest at 20.9% on both cards.
A unique benefit of the Fluid card is its eligibility checker which will tell you the likelihood of being accepted before you apply.
The Virgin Money MasterCard, offering 26 months 0% interest, is another option. The same rules apply and you’ll need to pay a 4% fee on any money transfers you make.
The main downside for these cards is that you can only get one if you have a good credit rating. But there are other cards to consider.
The MBNA Everyday Visa, offers a slightly shorter 0% period at 18 months on money transfers, with a 4% fee.
You can also make a money transfer with the AA Balance Transfer Credit Card. It has a 16-month 0% period and again, a 4% fee.
If you're after a card that isn't backed by MBNA then Leeds Building Society offers a credit card with 12 months interest-free on money transfers, with (you guessed it) a 4% fee.
If a money transfer isn’t for you, another option is to take out a personal loan. If you have a good credit rating, you could get a personal loan for as little as 4.5% a year of loans of between £9,000 and £15,000.
This is significantly less than an overdraft at 19% but again you’ll only be accepted at this rate if your credit score is good.
If your credit rating isn’t perfect, you may be offered a loan at a higher rate but if it’s below the amount attached to an overdraft then it is still worth going for.