A credit card is a payment card that allows you to borrow money from the card issuer. Usually, banks and credit unions issue credit cards to eligible customers. You can use credit cards for various transactions, just like you can do with debit cards. These include buying goods and services, withdrawing at an ATM, sending money to a bank, among others. In this article, I will explain how to send money from a credit card to a bank account.
Even though credit cards link to particular banks or credit cards, you might need to transfer money to your checking account instead of using the card directly. That is why you need to understand the whole process not to make errors when carrying out the process. The ability to transfer funds across platforms helps to boost the economy of any country in the world. This can happen online or at the physical branches of various financial companies.
Apart from transferring money and purchasing goods, there are many advantages to having a credit card. The first advantage includes the ability to borrow money from your bank or credit union. This means that if you run out of money from your account, you will still be able to afford to buy various essential goods for your household and pay the debt at the end of the month. Secondly, it is safe to use a credit card since you do not have to carry large amounts of money.
How to get a credit card
The first step to acquiring a credit card is opening a bank or credit union account. After that, you can use your accounts for a particular duration and apply for a credit card. Suppose you have a good credit history from earlier financial institutions. In that case, it can be easy to get a credit card from an institution since they can get your information from the concerned bodies.
A credit card that you get according to your credit scores is called an unsecured credit card. Due to the different credit scores of cardholders, there are different credit limits for each individual: the higher your scores, the higher your loan limit on your card. For your information, a credit score refers to the creditworthiness of an individual. The scores range from 300 and 850, whereby 300 is the worst while 850 is excellent.
You can also get a credit card without a credit history by applying for the secured one. That means that you deposit a certain amount of money in your account to act as your security for the card if you cannot pay your debt. A secured credit card helps you to gain credit scores when you utilize it properly. With time, you can get your deposit and qualify for an unsecured credit card.
Another thing you should know about applying for a credit card is that you should be at least 18 years old. Since you must have a bank or credit union account, you need information such as the Social Security Number, Identification document, an email address, a phone number, and a physical address. Furthermore, you can send money with a checking account number instantly to members of the same financial institution if you have a bank or credit union.
How to send money from a credit card to a bank account
Even though credit cards allow you to borrow money and spend to purchase goods and services, you might need to move some funds within your credit limit to your checking account and spend in a way that a credit card cannot allow. The money you move to your bank account is called a cash advance.
When you use your credit card, you must repay the money you spend with some interest. Your interest starts accruing as soon as you spend a given amount. Therefore, as soon as you take out money from your credit card to your checking account, then interest begins taking effect.
The lower your scores, the higher your interest rates, and vice versa. If possible, you should avoid taking cash advances due to the interest rates involved. Furthermore, the process of getting money out of your card depends on your card issuer. Generally, you can send money from your credit card to your bank account in the following ways.
1) Direct transfer
Some financial institutions allow you to transfer funds directly into your bank account online. A good example is the U.S. Bank that allows you to transfer money to your bank account online. Since it is easy, the transfer option might put you into a lot of debts if you are not careful. The direct transfer option is not available with many credit card institutions, and you must check with your card issuer.
2) Using ATM
A credit card allows you to withdraw money from an ATM. All you need to do is walk to the nearest ATM that supports your card service provider, insert your card, enter your PIN and withdraw the necessary amount within your limit.
Once you have the cash, you can deposit it into your bank account using the ATM deposit option or move to your branch and deposit the money in your bank account.
3) Convenience checks
Convenience checks are special checks that your credit card issuer sends you to deposit in your bank account. They function as the traditional checks only that they come from your line of credit, and you must repay with interest.
The method allows you to take out a cash advance at a branch of your card issuer and deposit it in your bank account in person. The money comes from your line of credit, and you must pay back with the needed interest.
Using a credit card to move money to a bank can help lessen the period taken when you transfer money from one bank to another. It can take 2-4 days to move money from one bank to the other. Using a credit card, you can deposit money instantly into another bank.
How to grow credit scores for your credit card
As I mentioned earlier, your credit score determines your credit limit. If you have high credit scores, it means that you can get a credit card with a higher limit. Also, you will be able to pay low-interest rates for your credit. To increase your credit scores, you should ensure that you do the following.
i) Pay your debt on time
If you train yourself to pay your credit card debts on the exact date, the card issuer sends a positive report to the credit bureaus. Eventually, your scores increase, thus giving you a higher limit. Other financial institutions also can approve your loans with ease as they can trust you.
ii) Mix credit
Getting a variety of loans and repaying them as expected increases your credit scores. You can mix your credit by taking various loans such as personal loans, mortgage loans, credit cards, auto loans, and debt consolidation loans, among others.
iii) Good credit utilization ratio
If you have a credit card, you should not spend up to the last coin in your limit. You should practice a good credit utilization ratio with your credit card. If you spend anything below 30% of your credit limit, then you are okay. Preferably, you should work around 1% to 10% of your credit limit.
iv) Keep all your credit cards active
Dormant credit cards can lower your credit scores. Make sure that you spend a little on each of your credit cards per month. Such a practice will see you grow your scores over time.
What are the different categories of credit cards?
Credit cards come in two main categories, which include secured and unsecured credit cards. However, there are other subcategories which include the following.
i) Standard cards
These are types of credit cards whereby you get an extension of your credit limit due to carrying out balance transfers, make purchases, or cash advances. They have no annual fees.
ii) Premium cards
These are credit cards that offer perks such as special event access, airport lounge access, and many more. Usually, the cards have higher annual fees.
iii) Balance transfer cards
These are kinds of credit cards with low introductory interest rates and fees on balance transfers from a different credit card.
iv) Rewards cards
These are kinds of credit cards that offer cash backs or other benefits to users based on their spending.
v) Charge cards
The cards have no spending limits but cannot allow you to cross the other month with unpaid debts.
How are credit cards different from debit cards?
Even though there are various ways a credit card resembles a debit card, such as the ability to send money to someone without a bank account, buy goods online, and at physical stores, several differences are evident between the two types of cards. They include the following.
- A credit card allows you to borrow money from your issuer, while a debit card allows you only to spend what is in your bank account.
- Credit cards (unsecured) require you to have credit scores to get them, while debit cards only require you to own a checking account with your bank or credit union.
A credit card allows you to borrow money from your card issuer and pay at the end of the month with some interest. The cards are almost similar to debit cards, although there are slight differences between the two.
You can have a secured or unsecured credit card. One can have spending limits for an unsecured credit card based on their credit scores, while secured credit cards give you limits depending on your deposit.