Can You Wire Money with a Credit Card?

A wire transfer is defined as an electronic transfer between one financial institution to another. If you find that you are lacking funds to use to send money, you may consider a wire transfer with your credit card. However, can you transfer money from a credit card to a bank account? The answer may surprise you.

Sending Money with a Credit Card: Benefits, Risks, and How to Do It

In order to figure out whether or not you should send money from your credit card, you must first understand transfers. Two types of transfers are a bank wire transfer, and a money transfer.

Understanding a Bank Wire Transfer

A bank wire transfer is also referred to as an electronic transfer or just a wire transfer. These transfers send money from one bank account to another as fast as the same day. These are common for people that are making big purchases like a home. Some information you need will be the receiving bank’s information, and possibly a paper form. The exact documentation you would need will be detailed by your financial institution.

Understanding a Money Transfer

Basically, this transfer allows you to send funds electronically regardless of whether or not it is considered a traditional wire transfer. An example of this type of transfer is with a service like Zelle where you can almost instantly send funds. These transfers are typically done online or over the phone. The amount of time it takes to be received varies but it can take up to a few business days.

Can You Transfer Money From a Credit Card to a Bank Account?

Regardless of the type of transfer, you will need a cash advance. A cash advance is needed if you are going to pull the funds from your credit card to go towards your bank account. Unfortunately, there are some drawbacks of cash advances that you should be aware of before beginning the process.

Problem: You Can Deal with Fees

You should expect your cash advance to come with a fee. You can see these credit card lenders charging a percentage of the transaction amount or even a flat fee. It depends on which amount is larger. The fees of the cash advance ultimately end up raising the value owed of the funds removed so you will be responsible for that money.

Problem: Interest Charges

Just like a normal line of credit, you will have to deal with interest rates. Cash advances on your credit card can be costly. The interest rates you see in cash advances are typically higher than a normal APR. You could expect to see an interest rate of 25%. You also want to make sure to read the terms and conditions thoroughly. If your agreement does not allow a grace period on cash advances, you may end up paying interest charges even if you pay off your card before the end of the statement cycle.

Solution: How to Minimize Fees

Luckily, just as there is a drawback, there is also a solution. You can either keep the cash advance small or pay it back quickly. Since credit card lenders typically base fees off of the percentage amount of the transaction, a smaller cash advance means smaller, more manageable fees.

The same principle applies to paying your cash advance off fast. Just like your normal line of credit, your cash advance will have an interest rate. The faster you pay off the cash advance, there will be less interest to deal with.

Problem: Risk of Damaged Credit

A cash advance does run the risk to negatively impact your credit. Even if this impact is temporary, you may hurt your credit in the meantime. The larger the cash advance, the less available credit you may have. If you increase your credit usage too much, that high utilization means you could lower your score.

Solution: Keep Utilization Under Control

If your cash advance increases your utilization, then you may see your score decrease. The goal of your utilization is to be under 30 percent. You want to make sure that even with your cash advance you see that your utilization is still intact. Utilization is an important factor in building credit and can impact up to 30 percent of your score.

Problem: A Commitment

Unlike an unauthorized charge on your credit card, cash advances cannot be reversed. Lenders do this in order to reduce the risk associated with a cash advance from a lending perspective. There is no way you can recover the money from a cash advance transfer. There are a variety of scammers that take advantage of this.

Solution: Keep Your Wits About You

Since these transfers are permanent, you want to be diligent. This diligence means ensuring you know where the money is going or trust the recipient. If you are sending your money to your bank account, or to a trusted someone’s bank account, you should be okay.

How to Get a Cash Advance

In order to get the funds from your credit card to your bank account, you will need a cash advance. You can contact your credit card lender and request one. The process will begin from there. There may be a limit to the amount of money you can set your cash advance for. You can figure out these guidelines by contacting your lender.

Wondering Which Credit Card is Right for You?

It is important to review your lender’s policies around cash advances. In order to find a credit card that’s right for you, you need to decide what is important from your lender. You may want a lender that provides better fees, and more flexibility when it comes to a cash advance. Take your time to understand the terms and conditions before deciding on a credit card.

Credit Card Wire Transfer Alternatives

If a credit card transfer isn’t right for you, there are alternatives that you can consider. Some of the options below may be more suitable for your current situation.

Wire Funds from Your Bank Account

If you have the available funds and trust the recipient then you can just wire funds from your normal checking account. You can do this in a variety of ways but it is commonly done with a standard wire transfer. A good example of a tool that banks use is Zelle. Zelle instantly transfers money for no fee.

Use Your Debit Card

Even though online retailers may ask for your credit card number, you will likely be able to use your debit card as well. Some retailers don’t allow debit cards but you can always ask in advance! Always be wary of inputting your information.

Get a Cashier’s Check

Sending “guaranteed” funds can be achieved in many ways. Cashier’s checks are a very safe way to send money. The bank that issues the check is who certifies them. This means that they can’t bounce. As long as you don’t cash a fake cashier’s check, the funds will be guaranteed.

Consider Getting a Loan

You have multiple ways to borrow money from a financial institution. If you are looking for funds, you may want to consider a loan. Loans are a great tool in providing a lump sum of money. There are numerous types of loans that you can check out. You can even use tools online to check out your pre-approval odds with a variety of lenders. These tools don’t even have to impact your score!

Don’t Send Money Right Now

Getting the funds you need can be difficult. If you don’t need to spend the money right now then it may be beneficial to hold off. You should wait until you have the funds readily available in your checking account. If you are trying to send money for an irresponsible spending decision, difficulty finding funds may be the sign you need to hold off. You can circle back to the process when you have more money in your bank account. You need to decide when you should wire money from a credit card, and when you shouldn’t.

Use Your Credit Card as Normal

Instead of using a cash advance to make money from your credit card, just use your credit card. Assuming that you have the capability, credit cards can do what you need to do. You may have spending limits on your card, but you can contact your lender for all of your account information.

Improve Your Financial Standing

While cash advances can be a temporary solution if properly managed, you want to be smart about your money. This option is not sustainable. If you mismanage these cash advances then you could run yourself into debt. You may think that it won’t affect you but it easily could! It’s easy to spend money, it’s hard to make it back.

Commonly Asked Questions

  1. How Can I Send Money Using My Credit Card?

In order to send money using your credit card, you will need a cash advance. This cash advance should be handled with caution as they are not reversible and come with risks if not properly managed.

2. Can a Cash Advance Hurt My Credit Score?

Unfortunately, yes. For example, if your cash advance causes the utilization on your credit card to increase past 30 percent, you could see a negative impact.

References:

https://www.bankofamerica.com/deposits/wire-transfers-faqs/

https://www.cnbc.com/select/what-is-a-good-credit-utilization-ratio/

https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/

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