Visa® Balance Transfer or Cash Advance (2024)

FAQs

Visa® Balance Transfer or Cash Advance? ›

A balance transfer is a transaction that moves one credit card balance to another, while a cash advance allows you to borrow cash against your credit limit. They have similar terms, but balance transfers offer better rates than costly cash advances.

A balance transfer lets you transfer debt from one credit card to another. A cash advance lets you access money from your credit card account. Balance transfers tend to come with lower interest rates than cash advances.

If you want to pay off your existing credit card debt with a balance transfer, the Discover it® Balance Transfer is likely to suit you best. But if you need to make a big purchase and pay it off over time, the Discover it® Cash Back may be a better choice.

A balance transfer card lets you move debt from your credit cards, whereas a money transfer card lets you move debt from your bank account. So, a money transfer card could be a useful option if you want to either: Pay off something that isn't credit card, such as an overdraft.

Cash advances tend to carry a higher interest rate than the standard purchase interest rate on your credit card. While purchase interest rates on credit cards start as low as 12.99% and up to 20.99%, cash advance rates tend to be much higher — typically in the range of 22.99% to 27.99%.

You may have to pay a balance transfer fee

Many balance transfer credit cards will charge a balance transfer fee of 3% to 5% of the amount you transfer, usually with a minimum of $5 to $10. Let's say you transfer $5,000 and there's a 3% balance transfer fee. You'll end up paying a $150 fee just to do the transaction.

A balance transfer can improve your credit over time as you work toward paying off your debt. But it can hurt your credit if you open several new cards, transfer your balance multiple times or add to your debt.

The problem is that transferring a balance means carrying a monthly balance. Carrying a monthly balance by not paying off the minimum amount due each month—even one with a 0% interest rate—can mean losing the card's introductory APR, its grace period and paying surprise interest on new purchases.

In some cases, a balance transfer can positively impact your credit scores and help you pay less interest on your debts in the long run. However, repeatedly opening new credit cards and transferring balances to them can damage your credit scores in the long run.

After a balance transfer takes place, your old account remains open. The original card issuer will typically only close your account if you make a request for it to do so. Unless you have a good reason to cancel your old credit card, however, you may want to think twice before you close the account.

Why would someone want to use a balance transfer? ›

Take advantage of a lower interest rate.

If you are currently carrying a high balance on a credit card with a high interest rate, this can be one of the biggest advantages of credit card balance transfer. It's a great way to pay down your debt faster by lowering the total amount you are paying in interest.

John S Kiernan, Managing Editor

A 3% balance transfer fee is a good deal when it is paired with a 0% balance transfer APR. Nearly all credit cards with 0% balance transfer APRs have balance transfer fees of 3%, and you can still save a lot of money by reducing your interest rate even when there's a fee.

If you want to send a money transfer to loved ones abroad, this won't affect your credit rating either. It's also fine to pay for a money transfer with your credit card. This will only have an impact on your credit score if you fail to pay off your credit card balance on time.

Because its interest is immediate, high, and persistent, a cash advance can fast-track you to credit card debt.

Does a cash advance hurt your credit? A cash advance won't directly impact your credit scores, but it will use more of your available credit. And this can affect your credit utilization ratio, which is the amount of credit you're using versus the total credit you have access to.

Cash Advances Can Unintentionally Trigger Higher Credit Card Interest Rates. Credit card companies pay attention to cash advances and some appear to view frequent use of them as a potential sign of financial problems.

Balance transfers won't hurt your credit score directly, but applying for a new card could affect your credit in both good and bad ways. As the cornerstone of a debt-reduction plan, a balance transfer can be a very smart move in the long-term.

Credit card repayments go towards paying off the highest interest first. That means cash advances first, then new purchases and then your balance transfer.

The Benefits of a Personal Loan balance transfer:

The first advantage of a Personal Loan balance transfer facility is that the rate of interest is decreased, which in turn lowers the borrower's interest burden through lowered EMIs. Generally, the new lender will offer a lower rate of interest on the loan transfer.