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 charges £5 a day for going into the red. And even with an authorised overdraft, many accounts charge as much as 19% in interest.
One way to get rid of your overdraft is to transfer money from your credit card to your current account. Many credit cards allow you to do this. Once you’ve transferred the money, you can use it to pay off your overdraft.
Unfortunately, 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 for 26 months.
The biggest downside is that you’ll have to pay a 4% fee when you make the transfer. Remember that’s an upfront fee that you pay in one go. You’ll also have to make the minimum repayment on the card each month. If you’re late with a payment, the 0% deal will end immediately.
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 17.9% on the Virgin card and 18.9% on the Fluid card, unless you can transfer the debt to a second 0% card.
That second card could be a normal balance transfer card, it doesn’t have to offer money transfers.
The main downside for both the Fluid and Virgin cards is that you can only get one if you have a good credit rating. That's a shame as I suspect that many of the folk who would benefit the most from a 0% money transfer will only have an average credit rating.
There are other cards to consider though.
The MBNA 24-month, 23-month and 22-month Platinum Visas each offer 0% on money transfers, with a 4% handling fee. MBNA also offers the Everyday Visa, which offers 0% for 18 months on money transfers, with a 4% fee.
If you're after a card that isn't backed by MBNA then Leeds BS offers a credit card with 12 months interest-free on money transfers, again with a 4% fee.
If I’d been writing this article a year ago, I would have recommended switching to a bank account with a 0% overdraft as an alternative. Sadly many 0% overdrafts have disappeared recently.
Read Five places where you can get an overdraft for free for a run through of your options.
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 4.9% a year. That’s going to cost you much less money than an overdraft at 19%.
If your credit rating isn’t perfect, you may be offered a loan at a higher rate – say, 10%. A loan at that rate is still worth going for. Read The cheapest personal loans for more.