Sending Money With a Credit Card: Benefits, Risks, and How to Do It
Wiring Money With a Credit Card Should Be a Last Resort
Need to wire funds but you don’t have cash in the bank? Sooner or later, somebody will suggest that you send money with a credit card.
It’s easy to do, and you can move money around the world. But before you provide those digits, see what you’re getting yourself into and evaluate the alternatives.
Types of Transfers
Before determining whether you should send money from a credit card, it's important to first define what we mean when we talk about different types of transfers.
Bank Wire Transfer
Wire transfers traditionally go through banks. These are same-day transfers from one account to another, and they’re popular for transactions like home purchases. To complete a wire, you’ll need to provide the recipient’s bank information, and you may need to submit a paper form (although small transfer requests might be available online).
This can mean several things, but the basic idea is that you send funds electronically, whether it’s a traditional “wire transfer” or not. The funds might even be available to the recipient on the same day—even within a few minutes, like with Venmo. Western Union, MoneyGram, and others offer this type of service, and you can set up transfers online or over the phone (the recipient can be identified by an email address, phone number, or name). Sometimes these transfers take two to three business days, as they move through the ACH network.
Downsides of Cash Advances, Transfers
No matter which method you use, you’ll need a cash advance if you plan to fund the transfer with your credit card. An advance provides “free and clear” money available for sending out immediately. But there are a few considerations that should come into play before you pull the trigger on either the advance or the transfer itself.
Cash advances come with fees. Most credit card companies charge a percentage of the transaction amount (with minimums of $10 or more) or a flat fee, whichever is greater. Fees effectively raise the price of whatever you’re paying for, so take the total cost into account when making decisions.
Cash advances on your credit card are expensive. The interest rate charged on advances is typically higher than the interest rate on balances that come from purchases (expect a rate of at least 25%). Plus, there’s no grace period on cash advances, so you’ll pay interest charges even if you pay off your card before the end of your statement cycle.
To get an idea of how much interest you might pay because of cash advance, plug your card's numbers into our loan calculator:
Risk of Damaged Credit
When you borrow against your credit card, you risk damaging your credit—at least temporarily. Large cash advances can use up the majority of your available credit limit, signaling that you may be in financial trouble. If you’re planning to make a large purchase in the near future (home or vehicle, for example), a lower credit score may make it harder to borrow. Avoid maxing out your credit card and pay the debt off immediately.
Unlike purchases on your card, you may not be able to have cash advances reversed, which reduces the risk for your bank or money transfer service. They may be only willing to make an irreversible transfer if they have the money more or less in hand. The recipient will be able to take the funds immediately (in cash, or by moving the money elsewhere), and there’s no way to recover the money.
Only send money if you know where it’s going, and if you trust the recipient. Several scams make use of wire transfers (or money transfer services), and con artists take advantage of misunderstandings about how these payments work. Most people think that their bank or Western Union can help if there’s a problem, but the money is usually gone for good.
How to Get a Cash Advance
If you’re planning to wire money using a bank, you’ll need to get funds into your bank account. You can do this by visiting a teller in your bank’s branch and requesting a cash advance (moving the proceeds into your checking account), or you can just withdraw cash at an ATM and deposit the funds into your account. If you’re using a money transfer service, the cash advance happens automatically as you go through the steps to complete a transfer.
Remember, if you use a credit card to fund a wire transfer, you’re borrowing money to make the transfer. As a result, you’ll pay a high interest rate on the money you borrow, and the fees will be added to your loan balance, increasing the total amount of interest you pay.
Credit Card Transfer Alternatives
Because of the risks and costs, you should consider other ways to send money. Depending on the situation and whether or not you need to borrow money, some of the options below might be a better fit.
Wire From Your Bank Account
If you don’t need to borrow and you’re confident about the recipient (you know it’s not a scam), just send funds from your checking account. There are several ways to do this, including using a standard wire transfer.
Pay With a Debit Card
Online sites usually ask for a “credit card” number, but you can use a debit card in most cases. Debit cards pull money from your checking account instead of creating a loan, so you’ll avoid cash advance and interest charges. Just be sure you know who you’re giving your card number to.
Money Order or Cashier’s Check
There are several ways to send “guaranteed” funds. In addition to wire transfers, cashier’s checks are considered to be extremely safe (as long as the check isn’t a fake). The issuing bank guarantees cashier's checks, so they can’t bounce. Money orders are also an option in some situations.
If you know the person you’re sending money to (a friend or family member, for example), try a free or inexpensive payment service. Square's Cash App moves funds from your checking account directly to the recipient’s checking account—using your debit cards—for free. PayPal is available for international payments, and there are several other options that may meet your needs.
Your credit card isn’t the only way to borrow. Assuming that you truly need to borrow, ask your bank about a personal loan (or any other options available) for drumming up the money. Online lenders and peer-to-peer loans may also be an inexpensive option, especially if you have a few days to work with. Credit cards are probably the fastest option, but you’ll pay a premium for that speed.
Getting a cash advance from a teller or an ATM is expensive. You might be able to pay less if you keep your eye out for special offers from your credit card company. With convenience checks or balance transfer offers, you can write a check to yourself and use the money in any way you like. Although you still might pay fees, there’s a good chance that the fees will be lower, and as a bonus, you could get a lower interest rate (for a limited time.)
Standard Credit Card Payment
Another option is to simply pay with a credit card (assuming cards are accepted). Credit cards can be used internationally, and you’ll get consumer protection benefits if you use your card to make a purchase directly. PayPal is a similar option, and it’s free to make purchases with PayPal. For some purchases, PayPal will even lend you money (through PayPal Credit.)
If none of the options above will work, it may make sense to use your credit card and wire money, but only in emergencies.
Save Instead of Spend
Borrowing money on credit cards is not sustainable. Eventually, high interest rates and steep fees can drag you into a debt spiral. You’ll spend more on maintaining the debt every month than you put toward the debt itself.
To avoid borrowing money, budget for necessary expenses and build up an emergency fund. Ideally, you’ll have enough to cover three to six months' worth of living expenses (or more, if you prefer to be conservative). Emergency funds should be kept somewhere safe and accessible, such as a savings or money market account. Avoid raiding the fund, and when surprises come up, you won’t need to pay hefty costs.
Sometimes borrowing is inevitable. If you like having a backup plan, you might benefit from keeping a line of credit open. A line of credit is a pool of money that is available for borrowing, but you don’t actually borrow until you need to. The line of credit should be inexpensive to maintain since you’ll only pay interest when you borrow money (if ever).
Consumer Financial Protection Bureau. "What Is a Wire Transfer?" Accessed April 2, 2020.
Venmo. "Instant Transfers FAQ," Accessed Dec. 4, 2019.
Wells Fargo. "Transfer Money FAQ," Accessed Dec. 4, 2019.
Consumer Financial Protection Bureau. "Comment for 1026.52 - Limitations on Fees," Accessed April 2, 2020.
Consumer Financial Protection Bureau. "§ 1026.52 Limitations on Fees," Accessed April 2, 2020.
USA.gov. "Credit Reports and Scores," Accessed April 2, 2020.
Discover. "What Is a Cash Advance?" Accessed April 2, 2020.
Wells Fargo. "Wells Fargo Online Wires," Accessed April 2, 2020.
Consumer.gov. "Using Debit Cards," Accessed April 2, 2020.
Washington State Department of Financial Institutions, "Cashier's Check Scams," Accessed April 2, 2020.
Cash App. "Sending a Payment," Accessed April 2, 2020.