Transferring money from your credit card to your bank account should be easy…
But most people’s first transfer ends up being anything but. They make serious mistakes that turn a small, short-term solution into a major financial headache.
There’s no reason to suffer through those mistakes yourself. Every one of them can be avoided by doing things the right way.
Here’s what you need to know about credit card to bank transfers before you make the first move.
What you’ll learn:
- What is a Credit Card to Bank Transfer?
- Costs Most People Overlook
- Mistakes People Make (and How To Avoid Them)
- How To Transfer Money The Right Way
What Is a Credit Card to Bank Transfer?
Transferring money from your credit card account to your bank account is called a credit card to bank transfer.
They’re almost always completed through a cash advance or by using a direct deposit feature provided by the credit card issuer.
A credit card to bank transfer can be a great temporary solution if you know how to avoid certain mistakes. They’re also bonafide traps for the unwary with fees and interest you don’t see coming.
Picking the right method matters too. If you’re planning to transfer a balance from a credit card you need to weigh the pros and cons of each approach. Choosing wrong could activate interest charges before you’ve had a chance to use the money.
Costs Most People Overlook
Most people do not realise there are two big fees associated with credit card to bank transfers.
The average cash advance fee is 4.01%. That fee applies immediately and it’s taken straight from your account.
But there’s another charge that hits almost as soon as the cash advance fee. With no grace period, interest begins accruing on the transferred amount immediately at a much higher rate than normal purchases.
The average APR for credit card purchases is 22.3%. Cash advances? They regularly top 30%.
Mistakes People Make (and How To Avoid Them)
It happens the same way every time.
Make one — or more — of these mistakes and your credit card to bank transfer will rapidly lose its appeal.
Here are the ones to avoid…
Treating It Like a Regular Debit Transaction
Hands down, the biggest mistake most people make.
Withdrawing money from your credit card account is nowhere near the same as taking it out of your bank.
There’s no grace period. No waiting on interest. Once the funds are moved, cash advance fees and interest start accruing immediately.
Assuming it works the same as a debit transaction is a costly mistake.
Skipping the Cash Advance Limit
Your credit card’s cash advance limit is not the same as the total credit limit.
They’re often much lower.
Credit cards with a £5,000 limit may only allow cash advances up to £1,000. Attempting to move more than that will leave you with a declined transaction (and possibly an additional fee).
Double check the cash advance limit before initiating a transfer. It can be found in the card agreement or by logging into your online account.
Not Reading the Fine Print About Timing
Timing is everything.
Just because you authorised a transfer doesn’t mean the funds will be available when you need them to be. Transfers don’t always happen instantly. They can take anywhere from one to five business days depending on the method.
Double check the time frame before making a transfer. Banks won’t publish their transfer terms anywhere tricky to find.
Choosing the Wrong Transfer Method
Every credit card has at least two ways to transfer money into your bank account.
But they’re not created equal. One will likely incur cash advance fees. The other may include a small transfer fee — but allow you to benefit from a lower promotional APR.
Make sure you know which method the credit card company will use. Confirming the transfer method before you authorise is the easiest way to make sure you get the better deal.
The most common credit card to bank transfer methods are:
- Cash advance — Quick, but costly. No grace period. Fees + high interest begin accruing immediately.
- Balance transfer — Sometimes cheaper thanks to promotional APR rates. Usually includes a transfer fee.
Forgetting it Affects Your Credit Utilisation Ratio
This sneaky mistake is almost never on anyone’s radar.
Did you know transferring money from your credit card to your bank increases your credit utilization ratio?
It does. And high credit utilization can wreck your credit score over time.
Cash advance limits are typically set at 20–30% of your total credit limit. That means a single transfer could push your available credit ratio well past 30%.
You should always strive to keep your credit utilization under 30%. Transferring more than 70% of your available credit at once will max you out.
How To Do It The Right Way
Do these 5 things before you initiate a credit card to bank transfer and you’ll never run into the problems mentioned above.
- Check your cash advance limit. Transfers can’t exceed this amount.
- Read and understand the APR charges and fees in your card agreement.
- Balance transfer vs cash advance. Pick the method with the lower fees.
- Check the processing time so you know when your funds will arrive.
- Keep an eye on your credit utilisation ratio once the transfer is complete.
Each of these steps represents a possible pitfall that can quickly turn a quick financial fix into an ongoing debt issue.
Final Thoughts
Credit card to bank transfers have their place, but don’t let them lure you into a financial trap.
Avoiding the mistakes above is simple — but most people fail to do them by skipping over the card agreement.
A 4.01% cash advance fee applied immediately and interest that starts building the second you authorise are scary realities of how credit card transfers work.
Knowing which method to use and how it will impact your credit score keeps more people from messing up than anything else.
If you do your homework and understand the pitfalls before you get started you’ll use your credit card like a pro and keep unnecessary debt to a minimum.
