With the Christmas spending season fast approaching many people will automatically turn to their bank for an overdraft to help manage their extra expenditure, but there is a cheaper alternative.
With many banks charging daily or monthly fees even for agreed overdrafts, the costs can soon mount up and vary widely between providers.
A credit card money transfer is still relatively unknown but it offers a much cheaper way to boost your bank balance and can be arranged at short notice.
Money transfers are still quite rare amongst credit card providers with MBNA and Virgin Money the main players offering this functionality to new customers. (Barclaycard and Tesco Bank offer it too but only to select existing customers).
A Money Transfer allows the card holder to transfer money from their credit card direct to their current account within one working day.
Up until recently Money Transfer promotions tended to be 0% interest but were quite restrictive as you had to make your transfer within the first 60 or 90 days subject to a one off MT fee of up to 4% of the sum transferred.
Any transfers after the short promotional window are charged at a standard rate of around 18% -20% APR, so really after the introductory period the Money Transfer costs made it far less attractive.
However the recently launched Everyday Plus Card from MBNA overcomes this issue and offers a long term low rate (no intro deal just 7.4% pa on-going) Money Transfer facility with no MT fee – thus you can use it in the same way as you would an overdraft.
It means that you are in control and can switch funds between your card and bank account as often as you need at a competitive rate and without any additional fees or restrictions.
The difference in cost savings compared with a traditional bank overdraft are more than you’d think and make this option worth considering – for example compared with a £2,500 6 week overdraft with Halifax this money transfer could save you more than £62 and with a Barclays Bank overdraft an eye watering £104.72.
I know some people will suggest a 0% purchase card – but do you really want to still be paying for Christmas next summer or beyond? – also as much as the comparison sites love it when customers switch and ditch their plastic, the reality is that a lot of people simply can’t be bothered and prefer to keep the same card for the longer term.
Please see tables in the link below for details of possible cost savings based on £750 for 3 weeks and £2,500 for 6 weeks.