Credit cards are an excellent tool that grants the cardholder an additional layer of credit, adding to their purchasing power. The benefits of having a credit card are not just limited to the extra credit. They include various lucrative benefits, such as offers and rewards, discounts, cashback and the option of a lifetime free credit card. However, some transactions might require immediate cash, such as paying other credit card bills or repaying car or home loan instalments. Credit cards allow cardholders to transfer cash from the card into their bank accounts. This article elaborates on how cardholders can redirect their funds from their credit cards into their bank accounts and the precautions they should take.
Ways to Transfer Money From Credit Card to Bank
The different ways cardholders can transfer money from credit cards to their banks are described below:
1. E-Wallets – E-wallets are an excellent medium to transfer money from your credit card to your bank account. Here is how it works:
Step 1: Register on an e-wallet app.
Step 2: Fulfil the Know Your Customer (KYC) criteria by providing the necessary documents and information.
Step 3: After verification of the KYC, you can transfer money from your credit card to your e-wallet.
Step 4: Once verified, go to “passbook” on the e-wallet app and add money to your wallet using your credit card. After adding, choose “send money to bank”. Enter the amount you want to transfer to your bank account. Follow the instructions, and the same amount gets credited to your bank.
Although e-wallets help you transfer money from your credit card to your bank account, they also charge a small transaction fee, the exact amount for which varies across wallets.
2. Money Transfer Services – Cardholders can use services such as MoneyGram, Remitly and Western Union to transfer money from their credit cards to bank accounts.
Step 1: Create an account with a money transfer service.
Step 2: Provide details such as full name, bank account number, and other basic info.
Step 3: Under the payment mode option, choose the credit card and add the amount to be transferred.
Step 4: Proceed to transfer funds. The processing time is quick. However, it may vary from one service provider to another.
Money transfer services typically charge a specific transaction fee for these services.
3. Offline Methods – Cardholders can select offline methods to transfer money from their credit cards into their bank accounts.
a. Cheque to Self – A cheque to self can be drawn instructing the bank to transfer money from credit card to bank. The transaction might take a few days to reflect.
b. ATM Withdrawals – Cardholders can visit their nearby ATM facility and withdraw cash using their credit card. They can deposit this money into their bank accounts. However, withdrawing cash from ATMs is subject to a considerable transaction fee.
c. NEFT/RTGS – Cardholders can fill out the NEFT/RTGS form and submit it to their banks, instructing the bank to debit their credit card accounts and credit the proceeds into the bank accounts.
d. Bank Branch – Cardholders may visit their nearest bank branch and avail of the facility of credit card cash withdrawal. The withdrawn money can be deposited into another account, such as a current or savings account.
Precautions to Follow While Transferring Money From Credit Card to Bank
Credit cardholders can route their money from cards into their bank accounts and save on hefty ATM withdrawal charges. However, they must understand the following aspects.
- Defaulting on credit card dues entitles the cardholder to pay an additional penalty on the outstanding amount. These charges cost much more in the case of the transferred money.
- The actual method of transferring funds from credit cards to bank accounts may not impact one’s credit score. However, non-payment of debt incurred from transferring these funds might hurt the cardholder’s credit score.
Credit cards help meet immediate liquidity requirements by providing cash to the cardholder’s account through various routes. Some credit card to bank account transfer routes, such as e-wallet and money transfer services, charge a separate transaction fee. Cardholders using the facility of transferring money from their credit card to their bank account should ensure they pay the credit card bills timely to avoid penalty charges.