There are a number of different ways to transfer money overseas and using a credit card is just one option to consider. Choosing to send money with credit card can certainly have its advantages, but there are some disadvantages and things to consider before you opt for this payment method, too. In this guide, we’ll provide a full breakdown of everything you need to know about using your credit card for money transfers.
There are several ways in which you can use your credit card to send money overseas: the two most prevalent are through banks and using online money transfer services. Before sending money by credit card, it’s always important to compare your options to guarantee you’re getting the best deal.
One way you can send money abroad using your credit card is with your bank. Usually, this can be done using your online banking app, phoning your bank or visiting your local branch.
When you do this, your credit card provider will likely treat this money transfer as cash in advance (we will explain this in the next section) and not as a credit charge, which often results in higher interest rates than usual, as well as the typical international bank transfer fees charged by your bank.
One of the most popular options for sending money internationally is specialist money transfer providers, who can offer more convenient and cost-effective ways of sending money anywhere in the world.
Many of these companies let you find your transfer through a credit card and other typical payment options such as debit cards and bank transfers. You can easily link your credit card to your money transfer account and send payments when needed, often within minutes from your mobile app instead of several business days. In many cases, this can be sent to cash pickup locations and into a recipient’s bank account.
If you are making a transfer using your bank, you will first need to transfer the funds into your account. For this, you will have to request a cash advance, wherein the funds will be moved into your checking account or you will have to withdraw cash and deposit the money into your account. When you are using money transfer services, this process happens automatically as you follow steps to complete the transaction.
Sending money by credit card is secure and convenient. Also, as we’ll explore below, sending money from credit cards is often an expensive way of transferring money abroad, so it is generally wise to use this payment method sparingly. However, it makes sense to use your credit card when funding international transfers for the following reasons:
Sending money from card to card is a less popular way of transferring money and not always the best option.
It’s more popular to pay by credit card and send money to a bank account, from which the funds will then be transferred to your card balance or used directly with the bank account’s associated card. We’ve covered this in more detail in our guide on making card-to-card transfers.
As with any payment method, there are advantages and drawbacks to sending money with a credit card. Here’s a quick summary of the pros and cons:
Sending money overseas using your credit card may not be the cheapest option. There are lots of fees involved, and you may not get the best exchange rates.
Remember, if you use a credit card to fund an overseas money transfer, you are borrowing money to make the transfer. So, you will have to pay a high-interest rate, and the fees will be added to your balance, which will increase the total interest amount. Some of the costs involved in sending money from credit cards include:
Cash advance fees are services offered by credit card providers that allow users to borrow or withdraw cash up to a specific limit. When you choose to use your credit card for sending money overseas, you must understand you are not using your credit but borrowing funds from your credit card provider. It is similar to getting a short-term loan that must be repaid within the billing cycle.
One of the most common fees associated with credit card-funded money transfers is the cash advance fee. It is a fixed amount or a percentage of the amount you are transferring from your credit card account. The percentage fee is often charged with minimums of $10 or more. Therefore, if your bank/provider charges a 3% cash advance fee and you intend to transfer $100 from your credit card, you will pay $10 (the minimum amount you have to pay) and not $3.
Most credit card companies charge a higher annual percentage rate (APR) for cash advances compared to the interest rate charged on balances that come from purchases. Moreover, interest begins accruing as soon as you initiate the transaction. As a result, you may have to pay at least 25% APR.
Credit card companies are not known to offer the best exchange rates. In addition, currency conversion fees are often relatively high, so you could pay a lot just for currency conversion, which can substantially increase the total transfer costs. The currency conversion fee typically ranges from 1% – 3% of the transaction amount.
If you regularly make overseas transactions it might be worth considering applying for a credit card with no overseas transactions fees. There are several options for Canadian citizens, from the Scotiabank Gold American Express Card which offers no foreign transaction fees and savings on travel, for an annual fee of CAD$120 or the Brim World Elite MasterCard which has no foreign transaction fees and allows holders to receive 2% cashback on their first $25,000 annual purchases for a $199 annual fees. Although the annual fees in both cases are quite high, with many foreign transaction fees coming in at 3.5% they might work out beneficial for those sending large amounts of money overseas regularly.
Most forms of international money transfer will have fees and charges, but you can reduce the overall cost of your transfer depending on the payment method you select. It’s worth considering a bank transfer or debit card payment, if this proves more cost-effective.
It is important to note that using a credit card for larger transactions can also affect your credit score. When you take a significant cash advance, you may end up exhausting your credit limit. A poor credit score can make it harder for you to get other loans, such as a vehicle loan or a home loan.
If you are using a credit card to make an overseas money transfer, try to pay it off as soon as possible to avoid increasing charges or damaging your credit score.
Credit cards can be a convenient way to send money abroad, but there are other ways to save money, including:
In Canada, payment card network operators are overseen by the Financial Consumer Agency of Canada (FCAC) to determine whether they are in compliance of the Payment Cards Networks Act and the elements of the Code of Conduct for Credit and Debit Card Industry in Canada. Under these regulations, there are currently seven payment card network operators operating in Canada: MasterCard, Discover, Interac, American Express, Visa, The Exchange and Union Pay.
Sending money overseas from your credit card is an excellent option if you are looking for convenience and security. You can transfer money instantly even if you don’t have enough cash in your account. You can also enjoy other benefits such as cashback and frequent flyer points.
However, using credit cards for international money transfers can prove quite expensive because it involves high fees and interest rates. If you’re looking to save money, it is a good idea to look into using alternative methods such as bank transfers or debit cards. This can help you find the best possible deal while ensuring the maximum amount of money reaches your intended recipient.
When transferring money using your credit card, it is best to route your transfer through a money transfer service rather than a bank. While you will still pay the fees to the credit card provider, you can save on the transfer costs and get better exchange rates.
Before making any international transfer, make sure to use our quick and easy comparison tool to find the most convenient and cost-effective payment method for you. It’s always important to compare your options to guarantee you’re getting the very best deal.
Max is a content specialist with over 5 years of experience in Financial Sectors. His areas of expertise include Finance, Forex, Asia and Economic Ideas. He has traveled well in his day and is committed to making our users understand international financial rules.