Credit cards have become an integral part of our lives. They provide convenience and flexibility in managing our expenses. Credit cards offer several rewards and benefits, including cashback, reward points, and discounts.
However, one feature of credit cards that many people are unaware of is the ability to transfer money from credit card to bank account in case of emergencies. This post will explore the benefits of credit card to bank account transfer and what you need to know about this feature.
What is Credit Card to Bank Account Transfer?
Credit card to bank account transfer is a facility that allows you to transfer funds from your credit card to your bank account. This feature is handy when you need urgent cash and do not have sufficient funds in your bank account.
By transferring funds from your credit card to your bank account, you can avoid the high-interest rates credit card companies charge for cash advances.
Benefits of Credit Card to Bank Account Transfer
Transferring funds from a credit card to a bank account can have several benefits that are described below.
Lower Interest Rates
Credit card companies charge high-interest rates for cash advances, ranging from 24% to 36% per annum. On the other hand, transferring funds from your credit card to your bank account incurs a lower interest rate, which can be as low as 1.5% per month or 18% per annum. By opting for a credit card to bank account transfer, you can save significant money in interest charges.
Improve Your Credit Score
Credit utilisation is the ratio of your credit card balance to your credit card limit. The higher your credit utilisation, the lower your credit score. Transferring funds from your credit card to your bank account can lower your credit utilisation, improving your credit score. When you transfer funds from a credit card to a bank account, you’re essentially paying down your credit card balance, which can lower your credit utilization and potentially improve your credit score.
No Need to Apply for a Loan
You may consider applying for a personal loan when you need urgent cash. However, personal loans will take time to be approved. By opting for a credit card to bank account transfer, you can avoid the need to apply for a loan and get the cash you need quickly.
Easy Repayment Options
Credit card to bank account transfer also comes with easy repayment options. You can choose to repay the transferred amount in instalments, which can be as low as 5% of the transferred amount. By opting for instalment repayment, you can avoid the burden of repaying the entire amount in one go.
Avail of Credit Card Rewards
Transferring funds from your credit card to your bank account does not affect your credit card rewards. You can still avail of cashback, reward points, and discounts on your credit card transactions. This means you can enjoy the benefits of your credit card while getting the cash you need.
Things to Consider Before Opting for Credit Card to Bank Account Transfer
Before opting for a credit card to bank account transfer, it is essential to consider some factors.
Charges
Credit card to bank account transfer comes with fees and charges, which can vary from bank to bank. Before opting for this facility, check the fees and charges associated with the transfer.
Interest Rate and Repayment Options
While credit card to bank account transfer incurs a lower interest rate than cash advances, checking your bank’s interest rate and repayment options is still important. Make sure to choose a repayment option that suits your financial situation.
Credit Score Implications
Transferring funds from your credit card to your bank account can affect your credit score. While it can lower your credit utilisation and improve your credit score, it can also increase your debt-to-income ratio, which can lower your credit score.
Utilise the Facility Wisely
Credit card to bank account transfers should be utilised wisely and only when necessary. Excessive use of this facility can lead to a debt trap and financial instability. It is vital to have a clear plan for repaying the transferred amount and avoid using this facility for frivolous expenses.
Eligibility
Not all credit cards and bank accounts are eligible for a credit card to bank account transfer. Check with your bank and credit card issuer to confirm eligibility before opting for this facility.
Timelines
Credit card to bank account transfers can take 2 to 5 days to reflect in your bank account. Plan accordingly and avoid relying on this facility for immediate cash needs.
Also Read: How does Credit Card Works?
Conclusion
Credit card to bank account transfer is a useful facility to help you manage your finances effectively. It offers several benefits, including lower interest rates, easy repayment options, and the ability to avail of credit card rewards.
However, using this facility wisely and considering the fees, interest rates, and credit score implications before opting for it is important. Considering these factors, you can make the most of credit card to bank account transfers and avoid financial instability.