If you’re strapped for cash and need to send money with a credit card, there are several ways you can complete the transaction. This includes taking a cash advance, using a peer-to-peer (P2P) app, or making use of a money transfer service.
While it’s convenient to send money by credit card, it may be costly and it could impact your credit. Before you transfer money, here’s a rundown on how to send money with a credit card and what you need to know about doing so.
Transferring Money From a Credit Card to a Bank Account or Debit Card
You usually have three methods to choose from in order to send money by credit card. Here’s a breakdown of how each one works.
1. Cash Advance
The first way you can send money using a credit card is through a cash advance, one of the ways credit cards work. Essentially, a cash advance is like a personal loan that you can use to pay bills or make purchases.
Since you’re borrowing money from your creditor, the cash advance will begin accruing interest immediately. Also, you must pay a fee. Therefore, it’s best to be timely when repaying the loan amount.
Depending on your credit card company, you may have several options for taking a cash advance, including:
• Visiting an ATM
• Requesting a convenience check
• Going to a bank branch in person
• Getting a cash advance from a loan agency (though you’ll need a credit card PIN for the agency to distribute the funds, which is different from the CVV number on a credit card)
If you’re requesting a cash advance from your local bank, they may allow you to visit a bank branch and deposit the funds directly into your bank account. A convenience check works similarly to a traditional check, except the funds come from the line of credit on your credit card instead of directly from your bank account. You can then deposit the money into your bank account or use it to pay for another expense.
2. Peer-to-Peer Applications
Another option is to download a P2P app like Square’s Cash App or PayPal. Then, you can link your account to your credit card and send money to another receiver.
It’s important to note that all P2P apps have different requirements for sending funds, and they can charge a fee to do so. For example, if you choose to use the Cash App to send money with a credit card, you’ll pay a 3% fee.
3. Money Transfer Services
Lastly, you could use a money transfer service to send money by credit card. For example, Western Union allows customers to pay for a money transfer using a credit card. You can do so via the app, in person, or online. But, like the other solutions for transferring money with a credit card, a money transfer service may charge a fee.
You may also be able to transfer funds from your credit card to your bank account through your bank.
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Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.
Banks vs Money Transfer Providers for Credit Card Payments
Usually, if you decide to transfer money using your bank, your creditor will categorize the transfer as a cash advance. Your creditor will charge a fee, and if you’re sending the money internationally, you also may have to pay a foreign transaction fee. A cash advance interest rate — which is usually higher than the average credit card interest rate for purchases — will also apply.
You can request that the cash advance get directly deposited into your bank account, or you can take the cash advance from an ATM or request a convenience check. Once you receive the funds or the check, you can deposit the money into your bank account.
On the other hand, when you use a money transfer service, you will link a credit card to your account. This gives you the ability to send money, often within minutes. However, depending on the company, you may have to pay a fee for the transaction. Creditors generally treat this transaction just like any other purchase transaction, meaning the purchase APR on a credit card will apply.
Things to Consider When Transferring Money From a Credit Card
Although using credit cards to send money is a convenient solution, it’s not always advisable. When you have the choice, using cash or your savings is a better option since you can avoid paying high fees or going into debt that might not be easy to shake (here’s what happens to credit card debt when you die, for instance).
But, if you find yourself in a bind and have limited options, you may need to send money with a credit card. Before you do so, however, here are a few considerations to keep in mind.
When you take a cash advance from your credit card, it can negatively impact your credit. Credit bureaus use your credit utilization ratio to determine your credit score, which is the amount of credit you’re using versus the amount of credit you have available. Ideally, you want your credit utilization ratio to fall under 30%.
If you take a cash advance, there’s a chance it will spike your credit utilization ratio and ding your credit. For example, let’s say your credit limit is $5,000, and you take a $3,000 cash advance. This would make your credit utilization ratio 60% — double the recommended benchmark. Keeping your credit limit above this threshold for too long can affect your credit score.
Likewise, not handling your credit card usage responsibility can harm your credit. So, even when using a P2P app to send money, it’s important to make on-time credit card payments (ideally of more than the credit card minimum payment) to avoid late fees or potential damage to your credit score.
Most options for using a credit card to transfer money will involve a transfer fee. This may be a fixed amount or a percentage of the cash advance.
While you can compare options to identify the cheapest solution, it’s best to find a solution that doesn’t charge any fees. This way, you don’t have to worry about losing money on the extra fees you must pay.
In addition to fees, you must pay interest on all of your credit card purchases — including money transfers — if you don’t pay off your balance in full each billing cycle given what a credit card is and how it works. And, if you take a cash advance, your interest rate is usually higher on those transactions. Further, interest on cash advances starts accruing immediately.
So, even if it is an emergency, you must consider the interest you’ll pay if you choose to send money with a credit card.
Pros and Cons of Sending Money With a Credit Card
Understanding the advantages and disadvantages of sending money with a credit card will help you make a more informed decision. Like with most financial decisions, there are pros and cons to using a credit card to send funds.
• Rewards. You could earn rewards if you have a credit card that offers cashback, miles, or bonus points when you spend money. Purchases may include a money transfer if you decide to use a money transfer service.
• Convenience. Using a money transfer service can help you transfer funds from your credit card to another party within minutes. So, if you need money fast, this could be a viable solution.
• Security. Using a credit card is often more secure than using a debit card. Credit cards typically have stronger fraud protection and other security features to keep your money and identity safe, especially when sending money abroad. For instance, if you believe a charge is fraudulent, you can request a credit card chargeback.
• High interest rates and fees. If you choose the cash advance route, you must pay the cash advance fee and cash advance interest rate. Even if you use a money transfer service, you’ll usually pay a fee.
• Not accepted everywhere. Some companies may not accept a credit card as a form of payment for a money transfer.
• Potential impact to your credit. If you’re unable to pay off the cash advance or your credit card balance, it could impact your credit score. This can make it harder to get approved for a loan or a mortgage in the future.
Alternatives to Using Credit Cards for Sending Money
Again, if you send money with a credit card, you’ll have to pay fees and interest. With this in mind, there are other alternative solutions that can help you save money. Some other options you may consider include:
• Low-interest personal loan. If you have a good credit score, you could qualify for a competitive interest rate, potentially one that’s lower than your credit interest rate. Also, personal loan approval can happen quickly, so you may not have to wait too long for the money to come through.
• Credit card with 0% introductory offer. Some credit cards offer promotional periods where the APR is 0%. Some may simply offer a good APR on a credit card that’s lower than the standard APR. This means you could make purchases and not have to pay interest. However, you’ll still have to pay the transfer or cash advance fee if you go this route.
• Home equity line of credit. A home equity line of credit (HELOC) lets you access the equity you have in your home. You may have a lower interest rate compared to unsecured lines of credit, and your lender may even waive the closing cost for the line of credit. Keep in mind that this loan is secured by your home though, so if you fail to repay it, your home may be on the line. An unsecured credit card, meanwhile, doesn’t require any collateral.
Looking for a new credit card?
While it is possible to send money with a credit card, you’ll need to consider the pros and cons involved before doing so. You could earn rewards and get funds fast, but you’ll also incur fees and interest, and could harm your credit score. Ideally, you can find an alternative with less fees and interest involved.
For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.
Can you transfer money with a credit card?
Yes, you can transfer money using a credit card via a cash advance, P2P app, or a money transfer service. But, many of these options come with extra fees, so before you choose one, make sure you understand the costs involved.
Is it secure to use a credit card to transfer money?
Yes, usually credit cards provide fraud protection and additional security features to protect your money. This can make them more secure to use than debit cards, for instance.
†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.
*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.
Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/23 11:59PM ET
Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.
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SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.1
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