How to Send Money from a Credit Card to a Bank Account?

Radha had to transfer ₹50,000 from her credit card to her bank account to clear an immediate medical bill. Radha's credit card limit was ₹1,20,000 and the available balance was ₹92,000. She employed the services of a reliable digital wallet app which supported credit card to bank fund transfers. 

Opting for the instant mode at a 2% charge, she was charged ₹1,000. She sent the amount at 2:17 PM and at 2:22 PM, the amount of ₹50,000 was credited to her SBI account number 8421. Now at peace and with the amount of ₹51,000 deposited into the account, Radha cleared the bill at the hospital at the earliest opportunity.

Methods to Transfer Funds from a Credit Card to a Bank Account

Example:

• Amount Withdrawn: ₹20,000
• Cash Advance Fee (2.5%): ₹500
• Interest Rate: 3.6% per month
• Repayment After 30 Days:
  • Interest = ₹720 (3.6% of ₹20,000)
  • Total Repayable = ₹20,000 + ₹500 + ₹720 = ₹21,220

Even if Radha repays within a month, she ends up paying ₹1,220 extra on a ₹20,000 withdrawal.

Balance Transfer Checks

Convenience checks known as balance transfer checks are issued by your credit card company and deduct money from the credit limit on your card. They can be deposited into your bank account, used to make purchases, or used to settle bills on other credit cards.

Associated Costs:

• Balance Transfer Fee: Most credit cards charge a fee for balance transfers, typically between 3% and 5% of the amount transferred. For example, transferring ₹10,000 at a 3% fee would cost ₹300.
  
  
• Interest Rates: Balance transfer checks may offer a 0% introductory APR for a set period. After this period ends, the remaining balance may accrue interest at the card's regular APR, which can be as high as 35%.

Risks Involved:

• Cash Advance Treatment: Some issuers may treat balance transfer checks as cash advances, which means interest starts accruing immediately, often at higher rates, and without a grace period.
  
  
• Credit Utilisation Impact: Using a large portion of your credit limit can increase your credit utilisation ratio, potentially lowering your credit score.
  
  
• Potential for Increased Debt: If you don't pay off the transferred balance within the promotional period, you may incur significant interest charges.

Note:

• Read the Terms: Always review the terms and conditions associated with balance transfer checks to understand the fees, interest rates, and any promotional periods.
  
  
• Evaluate Alternatives: Consider other options, such as personal loans or debt consolidation, which may offer lower interest rates and more favourable terms.
  
  
• Plan for Repayment: Ensure you have a strategy to pay off the transferred balance before any promotional period ends to avoid high-interest charges.

Example:

Radha received two balance transfer checks from her credit card issuer, each with a 0% interest offer for 90 days and a 3% fee.

• Check Amount: ₹30,000
  
  
• Fee (3%): ₹900
  
  
• Amount Credited to Bank Account: ₹30,000
  
  
• Repayment Plan: Radha plans to repay ₹10,000 each month to avoid interest after the 90-day promo ends.
  
  
• If unpaid after 90 days, Interest would apply at 24% APR.

By using the check and repaying within the promo period, Radha avoids interest and only pays the ₹900 fee.

E-Wallets (Paytm, Amazon Pay, Google Pay)

For example:

Radha's Transaction:

• Amount to Transfer: ₹10,000
• Platform Used: Paytm
• Credit Card Load Fee: 2.5%
• Bank Transfer Fee: ₹0 (assuming standard transfer)

Calculation:

• Credit Card Load Fee: ₹10,000 × 2.5% = ₹250
• Total Deducted from Credit Card: ₹10,250
• Amount Received in Bank Account: ₹10,000

Online Bank Transfers via Net Banking

How It Works:

• Initiate Transfer: Log in to your bank's net banking portal.
• Select Credit Card Section: Go to the 'Credit Card' or 'Fund Transfer' section.
• Choose Transfer Option: Select 'Transfer to Bank Account' or a similar option.
• Enter Details: Input the amount to transfer and your bank account details.
• Confirm Transfer: Review and confirm the transaction.

Availability:

• Not all banks offer this feature.
• Availability varies; some banks may provide this service, while others do not.

Security:

• Ensure you're using a secure internet connection.
• Never share sensitive information like your CVV, PIN, or OTP.

Example:

• Bank: HDFC Bank
• Credit Card Limit: ₹1,00,000
• Available Limit: ₹75,000
• Amount to Transfer: ₹20,000
• Cash Advance Fee: 2.5% = ₹500
• Interest Rate: 3.6% per month (no grace period)
• Total Interest for 30 Days: ₹720
• Total Cost: ₹20,000 (principal) + ₹500 (fee) + ₹720 (interest) = ₹21,220

Steps Radha Followed to Transfer Funds via NetBanking

Radha successfully got urgent funds into her account but ended up paying ₹1,220 extra for the convenience.

Conclusion

When you need money immediately, whether it's for a medical emergency, rent payment, or a financial emergency, transferring funds from a credit card to a bank account can be a lifeline. As Radha's example taught us, there are a few different ways to do it: cash advances, online banking, e-wallets, and balance transfer checks. Each has different prices, speeds, and risks.

It is important to consider fees, interest rates, and the effect on credit scores in addition to the simplicity of use. As was also the case with Radha, you can make well-informed and well-planned financial decisions by moving quickly yet rationally.

Faqs

1. Can I transfer money from my credit card to my bank account directly?
 Yes, some banks and e-wallets allow this, but it often involves fees and interest.

2. Is it safe to transfer funds from a credit card using net banking or e-wallets?
 Yes, if done through secure, verified platforms and connections.

3. Do credit card to bank account transfers affect my credit score?
 They can, especially if they increase your credit utilisation or lead to unpaid balances.

4. Which method is cheapest for a credit card to bank account transfer?
 Balance transfer offers with 0% APR are usually the most cost-effective if paid on time.

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