If you’re in need of cash, you might wonder how to transfer money from a credit card to a bank account and whether it’s a good strategy to consider. Let SoFi help with that decision. Here, we will describe the nuts and bolts of this type of transfer and also provide alternatives to consider.
Can You Transfer Money to a Bank Account from a Credit Card?
This is a possibility, yes, as long as your credit card has a cash advance feature and you are below your credit limit. Let’s take a closer look at what cash advances involve and whether they are the right option for you.
How Does a Cash Advance Work?
Most (but not all) credit cards allow card holders to take a cash advance. A cash advance is, in essence, a loan provided by a credit card issuer. When you take a cash advance, you’re borrowing money from that issuer and the amount borrowed will appear on your credit card statement.
A credit card holder can take a cash advance up to their limit, which is often different from the credit limit they have when they use a card to make purchases. Typically, the cash advance limit is less than the overall credit card limit — often significantly so.
When considering a transfer from your credit card to a bank account, keep the following in mind:
The pros: This kind of money move is a quick, convenient way to get cash when you really need it — say, when an emergency hits. You don’t need to spend time seeking a loan or awaiting approval.
The cons: These transfers are expensive; they can involve high interest rates (we’re talking 25% or more) and fees. What’s more, they can negatively impact your credit and leave you with significant credit card debt.
Due to these downsides, you may only want to do this kind of transfer when absolutely necessary and no other options exist.
Ready for a Better Banking Experience?
Open a SoFi Checking and Savings Account and start earning 1.25% APY on your cash!
Ways to Transfer Money From a Credit Card to a Bank
Let’s say you decide to opt for this kind of transfer. Sometimes, you need to get that cash! You may be wondering how exactly to complete the transaction. The ways that lenders may allow you to take a cash advance and transfer funds from your credit card to a bank account can include the following:
• Direct transfer
• In person
• Check
• ATM
Here’s more about each.
By Direct Transfer
Plenty of financial institutions offer online and mobile banking. If so, you may be able to log into a website or use an app to transfer money from a credit card to your bank account. This makes it very quick and easy.
In Person
You can request a cash advance on your credit card at a branch of your bank. You can then either take the cash with you or have the bank teller deposit it into an account.
By Convenience Check
Credit cards with a cash advance option may come with checks that allow you to conveniently write one for cash or deposit. The dollar amount of the check would then be charged as a cash advance on your credit card account.
By ATM
You may be able to use your credit card’s PIN to take a cash advance. Depending on the options at your ATM, you may be able to withdraw the cash advance and then deposit the funds to your checking account or savings account. Alternatively, you may be able to transfer the dollars in one transaction. Note that ATM-based transactions may have lower dollar limits, especially if you’re withdrawing the cash.
Is It Good to Transfer Money From a Credit Card to a Bank Account?
Phrased another way, are cash advances on a credit card a good idea when funds are needed? Advantages include that you can quickly and easily get cash from credit cards without the need for an approval process, given that your credit card account has a cash advance feature and a limit that provides what you need.
Cash advances on credit cards come with several disadvantages, though, including these:
• High interest rate and APR, often much higher than what you’d pay in interest on credit card purchases. These cash advances can have an interest rate in the range of 25% to 27%.
• Interest immediately accrues without a grace period
• Additional fees, perhaps up to 5% of the amount advanced plus, if applicable, ATM fees
• Larger credit card payments because of the increased balance
• Potential impact on credit scores if your account balances are now 30% or more of your overall credit limits
When needing cash, you can compare these methods with other options described below.
Alternative Ways of Getting Money Into Your Account
First, a quick sidebar: As you think about this process, you may have taken a closer look at your credit card, including the interest rates charged and the balance you are currently carrying. Perhaps you realized that you’re paying too much in interest on that card. If so, you may want to seek out a lower interest credit card and then shift your outstanding balances there. There are many balance transfer credit card options that give you months or even over a year to enjoy no or low interest (for further reading: The Basics of Balance Transfer Credit Cards).
Now, let’s get back to the topic at hand: infusing your bank account with some moolah. Here are four ways to get cash without taking a credit card cash advance.
1. Work your network. If you have a short-term need for extra cash, consider friends and family members who might be willing to loan you money at a low interest rate. If you go this route, a written agreement can make the terms clear to both parties and can help to keep the transaction business like.
2. Get a payday loan. What if you can’t think of anyone to ask for cash, don’t want the emotional baggage of requesting money from your circle, or have been turned down? Another pretty straightforward route (but one that comes with much higher interest) is a payday loan, which may also be called a cash advance loan or check advance loan. A payday loan is similar to getting a cash advance except that you’d be getting an advance on your paycheck. They are often available from small credit merchants with bricks and mortar locations.
3. Take out a collateral loan. Consider a collateral loan to get a better interest rate. This involves putting up an asset that has equity, such as a car or home, and borrowing against it. When seeking this source of funds, it’s often a good idea to go to a financial institution you already have a relationship with. You’re more likely to get approval and a good interest rate.
4. Pursue a personal loan. Also investigate a personal loan, which is typically (but not always) unsecured. If a borrower has good to excellent credit, the interest rates for this kind of bank loan may be lower than what you’d be charged with a credit card advance.
Sending Money to Someone Else
Perhaps you’re seeking cash because you want something similar to sending money to someone else. Here are some resources that may help when transferring money from one bank to another.
Further reading: Wired transfers and P2P transfers.
Now that you understand the ins and outs of transferring money from a credit card to your bank account, you can make an informed decision. These transfers can be a good source of cash when you really need it (and fast!), but the high interest rates, fees, and potential negative credit-score impact are serious downsides.
Smart and Simple Banking with SoFi
Let’s face it: Sometimes managing one’s financial life can be stressful. You need more cash than you have, you’re late with a payment…all kinds of things can crop up. Which is why it’s important to have a banking partner who’s looking out for you! At SoFi, we’re here for you. With an online bank account, we give qualifying accounts a super-competitive APY. And we’re dedicated to being fee-free. No monthly or minimum-balance charges from us ever, plus we’ve got a network of 55,000+ fee-free ATMs. All of this helps you bank better.
FAQ
Will transferring money from my credit card to my bank account hurt my credit score?
Directly, no. Taking a cash advance and transferring it to your bank account won’t hurt your score. This transaction won’t appear on credit reports, either. That said, this action increases your credit card debt and, if that causes your credit utilization rate to go above 30%, that can have a negative impact on your credit score. To calculate your credit utilization rate, add up what you owe on revolving debt and total up your credit limits. If you’re using 30% or more of your limit, this can hurt your score.
Plus, if borrowing money from your credit card makes it harder to keep up with payments, that can damage your credit scores because paying bills on time is a major credit score ranking factor.
Is it a good idea to transfer money from a credit card?
Although this can be a quick, easy, and convenient way to get fast cash, rates are usually high — even higher than what’s charged with credit card purchases. Interest begins accruing right away without a grace period, and fees can be high. Other options to consider include borrowing from friends and family; taking out a payday loan; putting up an asset, such as a car, as collateral; or getting a personal loan.
How much does it cost to transfer money using my credit card?
Interest rates and fees can vary, depending upon the financial institution that you’re using. Check with yours for specifics.
What is the best way to transfer money from credit card to bank?
Options often include direct transfers from a financial institution’s website or app; an in-person request; via a convenience check; or at an ATM. Check with your institution to see if there are differences in the fees (such as an added fee for ATM usage). Then, if you’re going to transfer money, use the method that’s most convenient for you.
How can I get money from my credit card to my bank account without a fee?
Talk to your credit card issuer or check your agreement for the account to get fee-related information. To transfer money from a credit card to a bank, you will likely pay 3% to 5% of the transfer amount plus any applicable ATM fees. Although this can be a fast and convenient way to get funds, there are costs involved.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., 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.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Photo credit: iStock/shapecharge
SOMN1221099
