Can You Send Money With a Credit Card?

Sending money with a credit card is possible, but it often involves significant costs and specific considerations. While credit cards are primarily designed for purchasing goods and services, they can also facilitate cash access or money transfers through various methods. Understanding the financial implications of these transactions is important.

Sending Money Directly from Your Credit Card

A primary direct method for accessing cash from a credit card is a cash advance. This is essentially a short-term loan where you borrow money against your credit card’s available credit limit. This differs from a standard purchase because you are receiving cash directly rather than buying an item or service.

You can obtain a cash advance at an ATM, though you will need a Personal Identification Number (PIN) for your credit card. Another option is to visit a bank branch that supports your credit card network, where a teller can process the cash advance upon presentation of your card and identification. Some credit card issuers also provide convenience checks that draw funds from your cash advance limit.

The amount you can withdraw through a cash advance is typically capped at a percentage of your overall credit limit, often ranging from 30% to 50%. This cash advance limit is usually lower than your total credit limit. The amount borrowed, along with any associated fees, is immediately added to your credit card balance.

Using Third-Party Payment Platforms

Third-party payment platforms, such as PayPal, Venmo, and Cash App, offer another way to send money using a credit card. These services allow users to link their credit cards as a funding source for transactions. The process involves selecting the recipient, entering the amount, and choosing your linked credit card to initiate the transfer.

When using a credit card on these platforms, the transaction is often treated differently than when using a linked bank account or debit card. While sending money from a bank account or debit card is generally free, using a credit card usually incurs a specific fee charged by the platform. These platform fees are separate from any additional charges your credit card issuer might impose, which can classify such transactions as cash advances.

Understanding the Costs Involved

Sending money with a credit card, whether directly or through a third-party platform, involves various costs. For cash advances, credit card issuers typically charge an upfront fee. This fee is commonly either a flat rate, such as $10, or a percentage of the amount withdrawn, often ranging from 3% to 5%, whichever is greater. For example, a $300 cash advance with a 5% fee would incur a $15 charge immediately.

In addition to the transaction fee, cash advances are subject to a higher Annual Percentage Rate (APR) compared to standard purchases. Interest on cash advances begins accruing immediately from the transaction date, without the grace period usually offered for new purchases. Interest accumulates on the principal amount and the cash advance fee from day one until the balance is fully repaid.

When using third-party payment platforms, specific transaction fees apply. Venmo charges a 3% fee for payments funded by a credit card. Similarly, Cash App applies a 3% fee for sending money or adding funds via a credit card. PayPal’s fees for personal payments using a credit card are around 2.9% plus a fixed fee for domestic transactions. These platform fees are distinct from any cash advance fees or higher interest rates your credit card issuer may apply.

Key Considerations Before You Send

Before sending money with a credit card, consider the broader financial implications beyond just the immediate costs. Using a credit card for cash advances or certain third-party transactions can impact your credit score. When you take a cash advance, it increases your outstanding balance, which in turn raises your credit utilization ratio.

The credit utilization ratio is the amount of revolving credit you are using compared to your total available credit, typically expressed as a percentage. Lenders generally prefer this ratio to be below 30%. A significant increase in this ratio, especially if it pushes you above this threshold, can negatively affect your credit score. This differs from typical credit card purchases, which often have a grace period of around 21 to 25 days before interest is charged if the balance is paid in full by the due date.

Credit card companies and payment platforms also impose transaction limits. Credit card cash advance limits are typically a percentage of your overall credit limit, and daily or per-transaction limits may apply. Similarly, third-party platforms may have their own limits on how much money can be sent using a credit card within a specific timeframe. Considering whether a credit card is the most appropriate tool for a specific money transfer is prudent, given the associated fees, immediate interest, and potential impact on your credit profile.