How to send money overseas with your credit card
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.
Banks
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.
Money transfer providers
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.
When should you use credit cards for sending money abroad?
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:
Reward points/cashback: If your card provider offers favourable cashback options or other rewards, you may want to use it for funding international transfers. Ensure the high fees you are likely to be charged do not offset the benefits you expect in terms of cashback or reward points.
Emergency situations: In situations where you need to send money to someone urgently, but you do not have enough cash in your bank account, or you don't have your account details handy, the quickest way to transfer money is by using your credit card.
Sending money from credit card to credit card
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.
Pros and cons of sending money with a credit card
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:
- Reward programs: you may benefit from a reward program like frequent flyer miles, cashback or reward points.
- Useful in emergencies: Credit cards are helpful in an emergency when you have no other way of funding the transfer, or when other methods are taking too long.
- Convenience: Using credit cards for money transfers is convenient because you don’t have to move your money around to make the transfer as the process is done using credit.
- Security: Credit cards are a secure way to send funds overseas. Most credit cards come with fraud protection and other security features that make them very safe for international money transfers.
- High exchange rate margins: You’ll often pay high interest rates on cash advances which is levied from the day you send the money.
- Not accepted everywhere: Not all money transfer providers accept credit cards as a mode of payment.
- Hidden fees: There are other fees and charges involved when you choose to send money using credit card.
How much does it cost to send money overseas using your credit card?
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
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.
Interest charges
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.
Currency conversion fee
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.
Canadian credit cards with no overseas transaction fees
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.
Possible impact on your credit score when using a credit card for international transfers
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.
What are the alternatives to using credit cards for sending money overseas?
Credit cards can be a convenient way to send money abroad, but there are other ways to save money, including:
Bank transfer: You can make international bank transfers from your bank account. Banks provide multiple ways to transfer funds, but you need to pay for them regardless of your chosen method. The downside of bank transfers is that they tend to attract higher fees than other payment services. This means bank transfers are convenient and safe but not always the most cost-effective.
Debit card: You can use your debit card for sending money the same way you would use a credit card, routing your transaction via bank or money transfer provider. However, a debit card transfer is not as expensive as a credit card transfer because you do not have to pay the cash advance fee and other fees that come with using a credit card.
Money transfer services: There are specialized online payment services that let you transfer funds to any part of the world conveniently and at very competitive rates. They offer a variety of ways to fund your transaction, including bank transfer, debit card or e-wallet, depending on the service you choose. Many will also allow you to use your credit card as a payment method, which can be advantageous for the reasons summarised below. These services often charge minimal transfer fees and lower exchange rate margins than other payment options. We've compiled a list of the top 10 money transfer companies to get you started.
How are credit cards regulated in Canada?
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.
Summary
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.
