How to Use a Credit Card to Send Money

While credit cards are primarily designed for purchasing goods and services, specific methods allow for money transfers. Understanding these methods and their associated financial implications is important before proceeding with any transaction. This guide will outline the various ways to send money using a credit card and discuss key factors to consider.

Common Methods for Sending Money with a Credit Card

A cash advance involves borrowing cash directly against your credit card’s available credit limit. This differs from a standard purchase as you are withdrawing physical currency or transferring funds to a bank account rather than paying for a product or service. Cash advances can be obtained at ATMs, bank branches, or sometimes through convenience checks provided by the card issuer.

Another prevalent method involves using peer-to-peer (P2P) payment applications. Services like PayPal, Venmo, and Cash App enable users to send money digitally to others by linking a credit card as a funding source. While these apps are widely used for splitting bills or sending money to friends, using a credit card for these transactions typically incurs specific fees. Some money transfer services also allow credit cards to fund wire transfers, although these are often treated as cash advances by the credit card issuer.

Key Considerations Before Sending Money

Cash advances, for instance, typically involve an upfront fee, commonly ranging from 3% to 5% of the transaction amount, with a minimum fee often around $10. Additionally, interest on cash advances usually begins accruing immediately from the transaction date, as there is no grace period like with typical purchases. The Annual Percentage Rate (APR) for cash advances is generally higher than the APR for purchases, sometimes ranging from 22.99% to 27.99% or even higher.

Transactions made through P2P apps using a credit card also incur fees, typically around 3% of the amount sent. Furthermore, your credit card issuer might classify these P2P transactions as cash advances, leading to the same higher interest rates and immediate interest accrual. These transactions can also impact your credit score indirectly by increasing your credit utilization ratio. Lenders generally prefer to see credit utilization below 30%, and exceeding this can negatively affect your score.

Executing the Transfer: Step-by-Step Guides

To perform a cash advance at an ATM, begin by inserting your credit card and entering your Personal Identification Number (PIN). You will then select the “cash withdrawal” or “cash advance” option from the menu. After entering the desired amount, confirm the transaction and acknowledge any displayed fees to receive your cash. For an in-person cash advance at a bank, you will need to present your credit card and a government-issued photo identification to the teller.

When sending money through a P2P payment application, the initial step involves linking your credit card to your account within the app’s settings. This typically requires entering the card number, expiration date, and security code. Once the card is linked, navigate to the “send money” or “pay” function, select the recipient, and input the amount you wish to send. Finally, choose your linked credit card as the funding source and confirm the transaction details, including any associated fees, before finalizing the transfer.

Alternatives for Sending Money

Bank transfers, such as ACH transfers or wire transfers, typically offer lower fees or no fees, especially for transfers between accounts at the same institution. Debit card P2P transfers are another common alternative, as most P2P apps allow fee-free transfers when funded by a debit card or bank account.

Money orders can also be purchased with cash or from a bank account, providing a secure way to send funds without involving credit card debt. For physical payments, writing a personal check remains a widely accepted and often free method for transferring funds directly from a checking account. These alternatives generally help avoid the high fees and immediate interest charges associated with credit card money transfers.