What’s the difference between a money transfer and a balance transfer?

Balance transfer means that you shift the outstanding balance from a current credit card to a new credit card, often at a lower or 0% interest rate.

If your existing credit card account has a high interest rate, moving it to a lower one will mean that you can pay off the balance faster. This is because more of your payment amount will go to shifting the outstanding balance instead of just paying off the interest.

There can be fees attached to switching your debt to a different card, and this is typically a percentage of whatever you’re transferring over. It’s important that you check how much the fee for transferring a balance is, and then calculate the savings you’ll make on switching cards and compare the two.

Money transfer means that you're using your credit card to put money into your bank or building society account. This is typically used to clear an outstanding lump sum in your bank account, such as an overdraft or an unexpected bill, in order to make smaller repayments.

A money transfer can be helpful if you have a surprise expense or a major purchase that you can’t pay for directly using your credit card. It may allow you to transfer up to 95% of your available credit limit, helping you find funds that you may not have in your current account. It’s also helpful because once you make a money transfer, the funds will be available in your current account - ideal for those occasions when only cash will do.

To execute a money transfer, you’ll usually be charged a fee, and like balance transfers, this is typically a percentage of the money you are transferring over. You’ll also pay interest on the amount, though this can vary depending on whether you can secure a promotional rate. Lastly, there tend to be restrictions regarding the minimum amount you can transfer, and usually you will not be able to use a money transfer for a foreign account.

It depends on what you need. A balance transfer is moving your debt from one account to another so that the overall interest rate is lower when you make repayments. If you’re just looking to clear your debt in a shorter time, a balance transfer credit card could be a better option. It’s not a good idea to use a balance transfer if you’re just planning to spend or withdraw cash.

Whilst a money transfer will supply you ready cash to pay for one-off items or debts. It enables you to pay off that amount in instalments. If you need to pay an unexpected bill or clear your overdraft, a money transfer credit card could be a better option.

There are a few things you need to consider before you go for either a money transfer or a balance transfer.

The interest rates will vary with money transfers and balance transfers, but a rule of thumb is the lower the better. Some banks will offer 0% interest periods, but you’ll need to make a note of how long this period lasts, and calculate whether you can pay your debt off in this time. Don’t forget to also check what the interest rate is set to after the period ends - you don’t want to be caught paying a high market APR (Annual Percentage Rate) after a few months and see your payments skyrocket. Essentially, your annual percentage rate is the price you pay for borrowing money. Find out more with our handy guide to APR.

It’s essential to find out what the minimum repayment amount is each month, as missing payments can cancel low interest rates and damage your credit score. You'll need to make sure that you can afford the minimum payments on either your money transfer card or your balance transfer card in order for these accounts to be beneficial to you.

It’s important to take the fees into account when deciding whether to use a money transfer or a balance transfer, as the aim is to cut your costs, not add to them. The simplest way to figure out whether this is worth your while long-term is to see how much interest you are paying on your current card, loan or general debt for the year.

With both money transfers and balance transfers, it’s vital that you only borrow what you need and make your payments on time.

The content on this page aims to offer an informative introduction to the subject matter but does not constitute expert financial advice specific to your own situation. All facts and figures were correct at time of publication and were compiled using a range of sources.