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Different ways to transfer money from credit card to bank account

Olivia Wilason 737 21-Aug-2019

Credit cards present you with excellent opportunities to pay for goods and services online as well as offline. If you maintain your credit card account efficiently and make payments on time, you get the benefit of the interest-free period whereby you use the funds free of cost. It is one of the most significant benefits of having a credit card. You can have doubts on how to transfer money from credit card to bank account so that you can use it in an emergency.

Different ways to transfer money from credit card to bank account

Types of emergencies

The following types of emergencies can necessitate the transfer of money from your credit card account to your bank account.

a) You need to pay your loan installments such as a home loan or car loan. Banks do not accept credit cards for paying loan installments. They ask for a transfer from your bank account. Hence, you feel the need to use the available balance on the credit card account for repaying your loans. The ideal way is to transfer the balance to your savings bank account.

b) You might need the funds to ensure the clearing of a specific cheque that you might have issued to a third person.

c) You might need the funds to send to a third person, say your relative staying in India or abroad.

How do you transfer the balance?

There are many ways to transfer the balance from your credit card account to your bank account.

a) Cash Advance

Every credit card has a ‘Cash Advance Limit’ equal to approximately 30% of the approved credit card limit. You can withdraw cash from an ATM and deposit the money in your account. However, this method has some disadvantages.

 Cash advance facility does not come free of cost. Your bank will charge you a cash advance fee that can be in the range of Rs 500 per occasion.

You do not get any interest-free period when you avail cash advance. You have to pay interest on the amount you have withdrawn for the number of days it remains outstanding. Now, the bank’s APR could be as high as 36% per annum. Therefore, you incur heavy losses when you use the cash advance facility.

  b) Demand Drafts 

Alternatively, you can seek a demand draft from the bank for the necessary amount to credit the amount to your bank account. It is similar to your cash advance account in many ways because the banks treat it as such. You do not incur cash advance charges, but there can be charges for issuing demand drafts. The interest component is also there as it was in the case of a cash advance.

These two methods are secure, but you have to incur unnecessary additional expenses to transfer funds from your credit card account to bank account.

b) Transfer money through external agencies

External agencies like Moneygram or Western Union can also help transfer funds from your card account to your bank account anywhere around the globe. Many people use these methods to transfer funds to the account of their loved ones living abroad. However, these transfers are subject to international fund exchange rates along with the commission charges of Moneygram or Western Union. Secondly, the transfer of funds can take time. The transmission depends on various aspects such as the amount of transaction, the country's regulatory elements, and timing of the banks and hours of operation.

c) Using Pay wallets like PayTM or PayZapp

Payment e-wallets like PayTM, PayZapp and so on facilitate the secure purchase of products and services using the funds available in your e-wallets. You have facilities to recharge the e-wallets by transferring funds from your credit card. Use this facility to transfer the necessary amount from your credit card account to your PayTM account. Note that you should complete your KYC procedures before trying out such activities.

Once you transfer the funds to your PayTM accounts, you can transfer them to your bank account by exercising the withdrawal options available with PayTM or PayZapp as the case may be.

Note that these transfers from PayTM account might charge a service fee for effecting the transfer. These fees will be less than the cash advance fee and interest amount that you pay on your credit card. Nowadays, PayTM has become strict in this regard because many people have misused this facility to save on the interest component.

There are other e-wallets such as FreeCharge, MobiKwik, PhonePe, and so on. One has to be careful because swindlers have used these methods to clean up many bank accounts in the country. Secondly, there are limits that you cannot cross during a particular day. This method is popular because the transfer is instantaneous.

Final words

It is better to remember that this transfer from your credit card account to your bank account is a loan. You need to repay it when the bank raises the credit card bill. However, you can use the funds for a temporary period in case of need.

Updated 21-Aug-2019

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