Can You Send Money to Someone With a Credit Card?

Credit cards are primarily designed for purchasing goods and services, yet they can also facilitate money transfers. Understanding these methods and their associated financial implications is important for anyone considering such a transaction. This overview explains how these transfers work and what consumers should consider before proceeding.

Common Methods for Using a Credit Card to Send Money

One common approach to sending money using a credit card involves obtaining a cash advance. A cash advance allows a cardholder to borrow cash directly against their credit card’s line of credit. Cardholders can get a cash advance by visiting an ATM with their credit card and PIN, or by going to a bank branch with their card and identification. Some card issuers also provide convenience checks, which can be written to oneself and then cashed or deposited into a bank account.

Another prevalent method is utilizing third-party money transfer services and applications. Platforms like Venmo, Wise, and Western Union enable users to link their credit cards as a funding source for sending money. The general procedure involves selecting the credit card as the payment option, entering the recipient’s details, and confirming the transfer within the app or website. These services act as intermediaries, processing the transaction and disbursing funds to the recipient.

Fees and Interest Associated with Credit Card Transfers

Using a credit card for money transfers typically involves several fees and interest charges, which can significantly increase the overall cost. For cash advances, credit card issuers usually impose an upfront transaction fee. This fee is commonly a percentage of the advanced amount, often ranging from 3% to 5%, or a flat fee, such as $10 or $15, whichever amount is greater. Cash advances are subject to a higher Annual Percentage Rate (APR) compared to standard purchases, with rates often around 29%. Interest on cash advances begins accruing immediately from the transaction date, as there is generally no grace period.

Third-party money transfer services also levy their own fees when a credit card is used as the funding method. For example, Venmo charges a 3% fee for sending money via a credit card. Wise applies a small flat fee plus a percentage of the converted amount, which is displayed transparently to the user before the transaction. Western Union’s fees can vary based on the payment method chosen, with credit card payments often incurring higher costs than other options. If the money transfer involves different currencies or cross-border transactions, foreign transaction fees may apply, typically ranging from 1% to 3% of the transaction value and charged by the card issuer for international usage.

Transaction Limits and Credit Score Considerations

Credit card issuers often set specific limits on the amount of cash that can be obtained through a cash advance. These cash advance limits are typically a portion of the card’s overall credit limit, meaning a cardholder cannot access their entire credit line as cash. For instance, a credit card with a $10,000 credit limit might only allow a cash advance of up to $2,000 or $3,000. Third-party money transfer services also implement their own daily, weekly, or monthly sending limits when a credit card is used, varying by service and recipient country.

Using a credit card to send money directly impacts a cardholder’s credit utilization. This ratio compares the amount of credit used against the total available credit. When a cash advance or a credit card-funded transfer increases the outstanding balance, it raises this utilization ratio. A high credit utilization ratio, often considered anything above 30% of the available credit, can negatively affect a credit score. While a cash advance itself is not typically flagged as a separate item on a credit report, the increased balance contributes to higher utilization, which credit scoring models consider. Consistent high utilization or missed payments resulting from the expensive nature of these transactions can lead to a reduction in credit scores.