Visa® Balance Transfer or Cash Advance (2024)

FAQs

Is it better to do a balance transfer or cash advance? ›

Higher interest rate: Cash advances often carry the highest possible APR on a credit card—potentially much higher than your ongoing rate. A higher interest rate makes cash advances more expensive than purchases or balance transfers.

A credit card's balance transfer APR is typically lower than its cash advance APR. While several cards come with 0% APR offers on balance transfers, this is not the case with cash advances.

If you use too much of your available credit, this affects your credit utilization which in turn will reduce your credit score. Lastly, it's imperative that you pay back the cash advance the soonest you can, because interest starts to accrue the moment you take out the money.

A balance transfer can improve your credit over time as you work toward paying off your debt. But it can hurt your credit if you open several new cards, transfer your balance multiple times or add to your debt.

Transferring your debt has its drawbacks. Balance transfer credit cards often have a host of pitfalls that can potentially offset the benefits, including: Fees: Most credit cards have a 3% or 5% balance transfer fee. Temporary 0% APR: The 0% intro offer will eventually expire, and your regular APR may be 20% or higher.

In some cases, a balance transfer can positively impact your credit scores and help you pay less interest on your debts in the long run. However, repeatedly opening new credit cards and transferring balances to them can damage your credit scores in the long run.

The problem is that transferring a balance means carrying a monthly balance. Carrying a monthly balance by not paying off the minimum amount due each month—even one with a 0% interest rate—can mean losing the card's introductory APR, its grace period and paying surprise interest on new purchases.

After a balance transfer takes place, your old account remains open. The original card issuer will typically only close your account if you make a request for it to do so. Unless you have a good reason to cancel your old credit card, however, you may want to think twice before you close the account.

If you make $500 monthly payments, you'll pay off your card in 19 months – but it'll cost you $1,848.79 in interest along the way, or nearly $100 extra per month. By contrast, if you transfer your $7,600 balance first, you'll pay off your debt three months faster – and pay $0 in interest.

Because its interest is immediate, high, and persistent, a cash advance can fast-track you to credit card debt.

What is the biggest problem with using your credit card for a cash advance? ›

Perhaps one of the riskiest things to do with your credit card is to take out a cash advance. Interest starts accruing on the amount of cash you withdraw immediately — there's no grace period like regular purchases. And you'll likely incur a cash advance fee, which can be around 5% of the advance.

Does a cash advance hurt your credit? A cash advance won't directly impact your credit scores, but it will use more of your available credit. And this can affect your credit utilization ratio, which is the amount of credit you're using versus the total credit you have access to.

A balance transfer can affect your credit score, depending on 1) if you open a new card to transfer a balance and 2) what you do once your balances have been transferred. If you simply move your balances around on your existing cards, your credit score likely won't be impacted.

Pros and cons of balance transfer

Pay less interest each month on what you currently owe – most balance transfers offer a lower interest rate (often 0%) for an introductory period. Some credit card providers offer rewards when you take out a balance transfer card, such as cashback or shopping discounts.

Balance transfers require an approval process, which means your balance transfer request can be denied if you have a high credit utilization.

How do balance transfers affect your credit score? Even though balance transfers can help you tackle debt – thereby improving your credit score – they can hurt your credit score, too. If you apply for several different cards with low or 0% introductory interest rates, this can affect your credit score.

A balance transfer card lets you move debt from your credit cards, whereas a money transfer card lets you move debt from your bank account. So, a money transfer card could be a useful option if you want to either: Pay off something that isn't credit card, such as an overdraft.

Lower rates of interest offered by lenders translates to lower EMIs and thus, reducing your financial liability. Post opting for a loan, it is always a good idea to stay constantly updated about the rates of interest and consider a balance transfer if the difference in the rates of interest are significantly higher.

By completing a balance transfer, you'll end up paying less interest each month or no interest at all, depending on if your card comes with an introductory 0% APR offer on balance transfers.