A credit card deposit is a feature that allows you to transfer funds available on your credit card to your chequing account. For example, if you have $1,000 available on your credit card, you can transfer that $1,000 to your chequing account, and access it in cash.
Here's what you need to know about credit card deposit transfers:
A great example of a credit card deposit is offered by the MBNA Platinum Plus® MasterCard® credit card, which offers 0% annual interest rate (AIR)† on balance transfers* and deposits* for 12 months.
That’s like borrowing cash interest-free for a year! Think of your credit card deposit as a limited-time, low-interest loan. You can use the cash for any purpose. For example:
However, if the funds are not paid back on the credit card before the promotional period has expired, they will incur interest at the regular rate (17.99%).
Pay your deposit loan back before the grace period or promotion low interest rate period has expired. Failing to pay back your credit card loan will turn those low-interest funds into high-interest debt in a flash. Before you take any funds from your credit card, ensure you can afford to pay it back on time, and create a dedicated payment plan:
Deposit amount / number of months in low interest period = your monthly payment!
Using a feature like a credit card deposit or balance transfer changes how your credit card payments work -- it’s very important to understand these changes so you don’t encounter any surprises on your bill.
No more grace periods on purchases: Often, using the deposit feature will void your credit card’s grace period. This means you’ll no longer have 30 days to pay off additional purchases made with your credit card -- they will incur interest right away, until the deposit loan is paid back in full.
Your payments will be split: The credit card lender will now divide any payments you make on your credit card, meaning it will take more funds to pay down your principal balance.
Access to interest-free money sure is tempting but take care when using this credit card feature. Avoid these deposit don’ts -- they’re a sure-fire recipe for ending up in a debt hole:
Cash advances: This credit card feature allows cardholders to withdraw funds from their credit card at an ATM. However, there are often steep interest charges on withdrawn cash, charged without a grace period.
Balance transfers: This credit card feature allows cardholders to move a pre existing balance from one card to another. Credit cards with low balance transfer features will offer a lower interest rate for a period of time, giving the cardholder the chance to pay down their principal debt.