Can You Send Money on a Credit Card?

While credit cards are primarily designed for direct transactions, specific mechanisms allow cardholders to obtain cash or transfer funds. These methods differ significantly from standard credit card usage and carry unique costs and financial implications.

Cash Advances from Your Credit Card

A cash advance is a transaction that allows you to borrow cash directly from your credit card’s credit limit. This differs from a regular credit card purchase, where funds are directly transferred to a merchant. Cash advances are often available through several avenues, including withdrawing money from an ATM using your credit card and PIN, obtaining cash from a bank teller by presenting your credit card, or by cashing convenience checks provided by your credit card issuer.

These transactions typically incur specific costs. Credit card issuers charge an upfront cash advance fee, commonly 3% to 5% of the amount advanced, or a flat fee like $5 or $10, whichever is greater. For example, a $500 cash advance with a 5% fee costs $25 in fees alone.

Beyond the upfront fee, cash advances also come with a higher interest rate compared to the APR applied to purchases, often reaching 25% to 30% or more. A significant difference for cash advances is the absence of a grace period; interest begins to accrue immediately from the transaction date. Credit card companies also impose transaction limits on cash advances, which can vary depending on your credit limit and the issuer’s policies.

Sending Money Through Payment Apps

Peer-to-peer (P2P) payment applications, such as PayPal, Venmo, or Cash App, enable users to send money digitally. These platforms allow users to link various funding sources, including credit cards, to send money to another individual.

However, using a credit card through these payment apps for sending money is often treated differently by credit card issuers than a standard purchase. Many categorize these transactions as cash advances. This triggers the same financial implications as traditional cash advances, such as a specific cash advance fee and a higher interest rate that accrues immediately.

In addition to how credit card issuers classify the transaction, payment apps may charge fees for using a credit card to send money. These app-specific fees are typically 2.9% to 3.5% of the transaction amount, separate from any cash advance fee. For instance, sending $100 with a 3% app fee costs an additional $3. Both payment apps and credit card issuers impose transaction limits.

Understanding the Financial Realities

Using a credit card to send money, whether through a cash advance or payment app, is generally a costly option due to various fees and interest charges. Costs quickly accumulate, including the upfront cash advance fee, a higher interest rate accruing immediately without a grace period, and an additional app fee if applicable. These combined charges make it significantly more expensive than using a debit card or bank account.

The financial impact extends beyond immediate costs to your credit score. Using a large portion of your available credit limit for cash advances or P2P transfers can significantly increase your credit utilization ratio. A high utilization ratio, typically above 30%, can negatively affect your credit score, potentially making future borrowing more expensive.

The immediate accrual of high interest rates on these transactions can lead to rapid debt accumulation. If the amount sent is not repaid promptly, interest compounds, making the debt grow quickly. This can trap individuals in a cycle of high-interest debt, obscuring the long-term financial burden.

Both credit card issuers and payment applications impose transaction limits on how much money can be sent. These limits vary widely based on the specific card, your credit history, and the app’s policies. These restrictions mean that using a credit card may not be feasible for very large transfers. While sending money with a credit card might seem convenient in emergencies, be fully aware of the substantial costs involved.