Credit cards are forms of payment cards that allow you to buy goods and services and are different from debit cards in that the card issuers require you to have a credit history (for the unsecured credit cards) or deposit (for secured credit cards). For your information, credit cards allow you to borrow from your card issuer when in need. But can you transfer money from a credit card to a bank account?
You will learn about various ways to use your credit card, including buying goods and services and sending money shortly. When you get a credit card, your card issuer usually gives you a line of credit plus a limit. A credit limit refers to the highest amount of money that you can borrow with your credit card. Once it exceeds, then you cannot borrow any more. The credit limit depends on your creditworthiness.
When you get a credit card, you have to repay its debt every month or according to the agreement with your card issuer. Failure to pay the debts on time is the beginning of your credit history destruction. You may start qualifying for low-limit credit cards and, in the future, find it challenging to apply for other lines of credit and loans.
How to get a credit card
You can get a credit card from various financial companies. However, before getting a credit card, you have to check your credit scores, then hover around various websites for various financial companies to see the credit cards that they have for your scores. You can get your scores online from the credit bureaus. You first need to create an account with any credit bureau.
You can choose Experian, Equifax, or TransUnion, as they are the bureaus responsible for keeping the payment records of loans and credit card users. You can also get credit scores from Credit Karma, a site that issues free credit scores. After getting your credit scores, you can check on the cards available in various financial companies.
Each bank or credit union has various credit cards for various credit scores. There are credit cards for bad credit scores, others for good credit scores, and others for excellent credit scores. You can get a credit card online or at the physical branch of the institution. Once you get the card, you can then activate it and start using it for your transactions.
What are the factors to check when applying for a credit card?
There are various factors you should consider when applying for a credit card. They include the following.
i) Credit limit
Various credit card issuers have different credit limits for the same credit scores. You should be keen to check the credit card issuer with the highest credit limit. That way, you will have a high line of credit to use.
ii) Interest rates
You have to repay the card’s debt with some amount on top when you get a credit card. The extra amount is the interest, and that is one way on how credit card issuers make money from you.
iii) Withdrawal fees
Credit cards usually charge higher withdrawal fees compared to debit cards. However, different credit card issuers can charge different fees for their credit cards. The lower the withdrawal fee, the better the card.
iv) Monthly fees
Some financial companies may charge monthly fees on the credit cards that they offer you. Interestingly, there are credit card companies that do not charge monthly fees. Such companies are the best to work with.
v) Annual fees
Annual fees are charged yearly. Your card issuer may have a yearly fee for the card that you apply for. Some credit card issuers do not charge fees whatsoever.
vi) Minimum deposit
When applying for a secured credit card, one needs to pay a deposit to act as security. Secured credit cards are mainly for credit building, and if you get a card issuer with a low deposit requirement that suits your financial capability, then the better. A secured credit card is among the best ways on how to repair your credit score fast.
vii) Rewards
Some credit cards reward you with cashback, points, and miles. If you get such a card, the better as you will see the value of your money. However, you should not be lured by the rewards as they may blind you not to see various fees on your card.
How to use a credit card
As I mentioned earlier, you can use a credit card just as you can use a debit card or prepaid card. The following are ways you can use a credit card.
a) Pay for goods and services
You can use a credit card to pay for your goods and services at places that accept card payments. These include restaurants, supermarkets, filling stations, and online stores. At physical stores, you can swipe your card to pay. When making payments online, you have to enter your card details on the merchant’s website. These include the CVV, the card expiry date, and the card number.
b) Withdraw money
Credit cards allow users to withdraw funds from an ATM. You need the card’s PIN to access your credit card account while at the ATM. The only problem with using a credit card is that you have to part with hefty fees on the transaction amount.
c) Send money
A credit card allows you to transfer money from your account to others. You can carry out the process online when logged in to your account or at an ATM point.
Can you transfer money from a credit card to a bank account?
You can easily transfer money from your credit card to your bank account in what we call cash advance. There are four ways you can transfer money from your credit card to your bank account. They include the following.
1) Transfer over the counter
You can visit your bank with your credit card and identification documents and tell the teller to withdraw the funds from your credit card account, then deposit them in your bank account.
2) Use an ATM to transfer funds
ATMs allow you to deposit money in a bank account. When you visit the nearest ATM of your branch, you can withdraw money using the card and then deposit it in your bank account in the process prescribed by your bank. In most cases, your bank allows you to write a deposit slip, put it in an envelope together with your money, and then push it through the deposit slot. The officers will deposit the funds as per the banking slip information.
3) Transfer the funds online
If you want to transfer money to the same bank that issued you with the credit card, you can transfer the funds online from your card account to your bank account. You need to understand how to withdraw money from a credit card online to carry out the process successfully.
Online transfer is the most convenient way to transfer money since you only need to log in to your bank account online and initiate the transfer. Since you are transferring money within the same institution, the funds can reflect in your bank account within a few minutes.
4) Use a credit card convenience check.
You can ask your card issuer to give you a credit card convenience cheque which you write to cash out money from your credit card into your bank account. The checks work just the same as the standard checks.
Is it reasonable to get cash advances?
Cash advances come with lots of drawbacks. First of all, the process attracts high-interest rates compared to regular credit card usage. The card issuer starts charging an interest rate as soon as you get the cash advance from your credit card. Therefore, you do not get a grace period to prepare for your payment. When you use the card for purchases, you usually get a grace period.
Apart from the high-interest rate, you can be forced to pay cash advance fees. You can see that now you have two different fees to pay. The fee might be a flat rate or a percentage of the amount of money you withdraw.
Does using cash advance hurt my credit score?
Even though the withdrawal method is expensive, it does not hurt your credit scores whatsoever. Therefore, you should not worry about it. However, you should be observant not to use too much of your line of credit as surpassing the 30% of your line of credit can lower your credit scores.
Also, it is good to start paying your credit card advance as soon as possible as late payments can hurt your credit scores badly.
What is the alternative of cash advance?
Since cash advances are costly and can negatively impact your overall credit scores, you should consider applying for a personal loan to sort out your financial needs.
Bottom line
A credit card is a payment card that allows you to buy goods and services online and at physical stores, withdraw money and send money to others online. The card allows you to borrow funds from your issuer. When applying for a credit card, you should consider factors such as rewards, interest rates, credit limits, withdrawal fees, and so on. You can receive a cash advance from a credit card, but it attracts high charges.
