Can I Use a Credit Card to Send Money?

Methods for Sending Money

Sending money to another person using a credit card is possible through several common channels. One direct method involves obtaining a cash advance from your credit card. This process allows you to withdraw cash directly from an automated teller machine (ATM) or a bank branch. The cash can then be used to send money to someone.

Another prevalent method involves utilizing peer-to-peer (P2P) payment applications. Services like Venmo, PayPal, or Cash App enable users to link a credit card as a funding source. When you initiate a payment, you can select your linked credit card. The app facilitates the transfer to the recipient’s account, who can then transfer these funds to their linked bank account.

Dedicated money transfer services also offer the option to send funds using a credit card. Companies like Western Union or MoneyGram facilitate both domestic and international money transfers. These services provide an online platform or physical locations where you can initiate a transfer, specifying your credit card as the payment method. The funds are then made available to the recipient for cash pickup or direct deposit.

Associated Costs and Terms

Using a credit card to send money typically involves various fees and less favorable terms. Cash advances incur a fee, usually a percentage of the amount withdrawn, often ranging from 3% to 5% of the transaction, with a minimum fee around $5 to $10. For instance, a $100 cash advance could incur a $5 fee, meaning you receive only $95 but are charged for the full $100.

Cash advances begin accruing interest immediately from the transaction date, without the typical grace period offered on purchases. The annual percentage rate (APR) for cash advances is higher than the APR for standard purchases, potentially ranging from 25% to over 30%. This immediate and higher interest accrual can significantly increase the total cost of the transaction.

When using P2P payment apps to send money via a credit card, a transaction fee is applied by the app provider. This fee is a percentage of the amount sent, often around 3%. For example, sending $100 through a P2P app using a credit card might incur a $3 fee, meaning the recipient receives $100, but your credit card is charged $103.

Money transfer services also impose fees when a credit card is used as the funding source. These fees can vary widely depending on the service, the amount being sent, the destination, and the payout method. They are higher than fees for bank-funded transfers. Utilizing a credit card for these transactions can quickly increase your credit utilization ratio, which is the amount of credit you are using compared to your total available credit. A higher utilization ratio, above 30%, can negatively impact your credit score.

Credit card issuers often set a separate, lower limit for cash advances compared to your overall credit limit. For example, a card with a $10,000 credit limit might only allow a $1,000 cash advance. This restriction prevents individuals from draining their entire credit line through cash withdrawals, which are riskier for the issuer.

Other Payment Methods

Alternatives to credit card transactions for sending money offer different cost structures and processing times. Utilizing a debit card or linking a bank account directly to P2P payment applications like Venmo, PayPal, or Cash App allows for fee-free money transfers. These methods draw funds directly from your checking or savings account, bypassing the fees associated with credit card processing. Transaction speed can vary, with standard transfers taking one to three business days, while instant transfer options may incur a small fee.

Direct bank transfers, including wire transfers, are another common method for moving funds. Wire transfers are processed quickly, often within the same business day for domestic transfers. However, they involve a fee charged by the sending bank, which can range from $20 to $35 for domestic transfers and more for international ones. Automated Clearing House (ACH) transfers are electronic payments processed through a network for interbank transactions. ACH transfers are free or have very low fees, though processing times can be longer, two to five business days.

Prepaid debit cards can also serve as a tool for sending money, provided the card allows for person-to-person transfers or use with P2P apps. These cards are pre-loaded with funds and operate similarly to debit cards. The ability to send money from a prepaid card depends on the card issuer’s features and any associated fees. These alternatives avoid the immediate interest accrual and higher fees characteristic of credit card cash advances or credit-funded P2P transactions.