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In this article:
- How to Transfer Money From a Credit Card to a Bank Account
- Is It a Good Idea to Transfer Money From a Credit Card?
- How Transferring Money From a Credit Card Can Affect Your Credit Score
- Alternative Ways to Get Cash
When money's too tight to cover critical bills or expenses, you may have a number of options to turn to. One is to transfer cash from your credit card to a bank account—but this often isn't the wisest or most affordable route. Before you transfer money from a credit card, it's crucial to know how it works, what it costs and whether it's worth the potential risks.
How to Transfer Money From a Credit Card to a Bank Account
If you want to send money from your credit card to your bank account, you usually have two options: a cash advance or a balance transfer check.
Cash Advance
A cash advance is a short-term loan from your credit card issuer. You draw cash against your credit card's available limit, and you can receive the payment in several ways. However, interest rates, fees and repayment requirements differ from regular credit card purchases.
- Borrowing limits: Credit card companies often restrict how much of your available credit card balance can be used toward cash advances, and these rules vary by card issuer. You might also encounter daily cash advance limits from your credit card or bank, such as $300. A cash advance can't push your overall credit card balance beyond your credit limit either.
- Process: The process varies by issuer, but you can usually withdraw money for a cash advance from an ATM and then deposit it into your checking account. Some issuers let you transfer funds online directly from your credit card to your checking account, while others allow you to get a cash advance in person at a branch or by receiving a convenience check.
- Timing: You can get a cash advance right away with most of the above methods. Interest starts accruing on the cash withdrawal as soon as you take it out; there's no grace period like there is with a typical credit card purchase. If you need the money for something you could just pay for with your credit card, it's better to do that.
- Cost: The interest rate is usually higher on cash advances than for purchases, and you'll also pay a cash advance fee. It's typically around 3% to 5% of the amount borrowed—and you might pay ATM fees on top of it.
Learn more >> What Is a Cash Advance?
Balance Transfer Check
A balance transfer check is traditionally used to move a balance from a high-interest credit card to one with a low balance or no balance. But you can also use it like a cash advance; rather than using it to pay off a card balance, you'd put that money in your bank account.
It's different from getting a cash advance via a convenience check; a balance transfer check is usually a short-term promotional offer, similar to a 0% intro APR credit card promotion. These promotions might come in the mail as blank paper checks you can fill out and mail in, though you could receive an offer to do the process online.
- Borrowing limits: Specific policies on how much you can borrow vary by lender, but you won't be allowed to borrow an amount greater than your credit card's limit.
- Process: If you use a physical balance transfer check, you'll fill it out like a personal check and can deposit it in your bank account right away. If you have an online option, you might be able to request the funds be sent directly to your bank account.
- Timing: The exact timing for receiving money depends on how long it takes your financial institution to clear checks or transfer funds. Read repayment terms closely if you're using a balance transfer check that has a promotional APR. You'll want to make sure you repay the balance before the promotional period ends; otherwise, you'll pay the remaining balance at the (much higher) normal interest rate.
- Cost: If you nab a balance transfer check promotion, you might receive a very low APR, or even one at 0%. However, you'll typically pay between 3% and 5% of the check's total amount in balance transfer fees.
Learn more >> Should You Use a Balance Transfer Check?
Is It a Good Idea to Transfer Money From a Credit Card?
The short answer is no, it's not a good idea to transfer money from a credit card to your bank account for fast cash if you can avoid it. It's always a better option to use income or savings when possible to avoid going into debt.
If you urgently need to transfer money from your credit card, it's better to use a balance transfer check than a traditional cash advance if you have the option. They both accomplish the same thing—borrowing against your credit card limit—but balance transfer checks have a far lower interest rate (and possibly one at 0%).
Why You Should Avoid Cash Advances
Here are a few of the drawbacks of regular cash advances:
- Steep interest rates: Cash advance interest rates are typically much higher than purchase APRs on a credit card. So if it will take you some time to repay it, you'll pay for it in interest charges.
- No grace period: Unlike with credit card transactions, cash advances have no grace period, so the interest starts accruing as soon as you take the cash out.
- Fees: Most credit cards carry a cash advance fee, which will be either a small flat fee or percentage of the advance amount, with many card issuers charging a 5% fee for every cash advance. If you're taking out large amounts, that can add up fast.
Only take out a cash advance if you absolutely need the money in an emergency and don't have more cost-effective options, and you can repay it quickly to minimize interest fees.
Learn more >> Alternatives to Credit Card Cash Advances
How Transferring Money From a Credit Card Can Affect Your Credit Score
Transferring money from a credit card to your bank account can decrease your credit score by raising your credit utilization rate.
Your credit utilization rate measures how much of your total credit limit you're using at any given time on revolving accounts like credit cards, and it's one of the most important factors used to calculate your credit score.
Using a significant amount of your available credit can be a red flag to creditors, and credit usage that climbs above 30% can have a more significant negative effect on your credit scores. To calculate your overall credit utilization, divide how much you owe on all your cards by your total credit limits.
Credit utilization example: Say you add up all of your credit card limits, and the total is $10,000. The total of your balances across all cards is $3,000. You'd divide 3,000 by 10,000 and get 0.3, then multiply by 100 to get a percent. This leaves you with a credit utilization rate of 30%. However, if you then took out a cash advance of $2,000, your credit utilization ratio would jump to 50%. A ratio this high can negatively affect your credit score.
Alternative Ways to Get Cash
If you're experiencing a true emergency and need money immediately, consider other options before turning to a credit card cash advance.
- Get a personal loan. While not all financial institutions offer personal loans, and your credit needs to be in decent shape to qualify, personal loans typically have lower interest rates than credit cards and are repaid in fixed installments.
- Borrow from family or friends. It's risky to borrow money from loved ones, since it can create conflict and harm relationships. But if you have close friends or family members with whom you share strong mutual trust, consider asking if you can borrow money in a structured, documented way. To protect both of you, write up an agreement that outlines how and when you'll repay the loan, including any possible interest.
- Tap your home equity. If you own your home and have built enough equity through mortgage payments and/or rising home values, you could borrow against it with a home equity loan or line of credit. Just be aware that your home serves as collateral on the loan, which means you could lose your home if you don't pay back the loan.
- Explore other relief options. When you're running out of options, do everything possible to avoid high-cost borrowing options such as payday loans. Some last-resort tactics include exploring government and nonprofit programs that offer financial assistance and relief.
The Bottom Line
Credit card issuers offer various ways to easily get a cash advance, including the ability to directly transfer money from a credit card to your bank account. But it comes at a price, with high interest rates, steep fees and the potential to cause dings to your credit score. If your current credit card's terms are too punishing, consider finding a different credit card with lower cash advance fees or interest rates—or using a different borrowing method.
