Is It Legal to Transfer Money from a Credit Card to a Bank Account?

Credit cards act as a savior when you need money at crucial times. It also plays an important role when it comes to protecting our own money as it saves us from the hassles of carrying loads of money wherever we go. A lot of people keep credit cards with them to earn cashback and reward points but many also keep them so that credit cards can help them in their times of need and in emergencies. We all very well know that credit cards are used to make various transactions such as paying for our daily needs, shopping bills, utility bills, etc but less do we know how can we transfer money from credit card to our bank account. There are certain circumstances like – Payment of car loans, payment of home loans, etc., where paying through credit card is not allowed. Hence, we need to have a balance in our account to pay for these.

Although we may have higher credit limit cards, these won’t be useful in situations where we will have to pay our bills in cash and not through credit cards. Therefore, in these cases, what we can do is we can transfer money through our credit card into our bank account and then pay for the installments that need to be paid in cash.

Ways To Transfer Money From a Credit Card To a Bank Account

Generally, credit cards are made to pay for goods and services and are not designed to transfer cash to bank accounts. This can be an option to access some funds in case of urgent need or to meet some financial requirements but should not be considered a routine affair.
Now, you are not allowed to do a direct transfer to your account through a credit card but you will have to follow an indirect channel and make use of various applications or e-wallets linked to your bank account to complete this activity.

One way in which you can transfer money from a credit card to your bank account is through e-wallets such as Paytm, FreeCharge, or MobiKwik. The following are the detailed steps to transfer money to your Paytm wallet and the to your account from a credit card:

Steps to transfer money using Paytm

• Login and register with the Paytm application
• Add funds to your Paytm wallet using a credit card
• Once the funds are being added, Go to ‘Passbook’
• Click on the option ‘Send money to Bank’
• Select the ‘Transfer’ option
• You need to enter all the details of the account holder such as name, account number, and IFSC
• Hit the ‘Send’ button and your money will be transferred to the respective bank account

Things you should know

• Generating credit to your bank account through a credit card is not a wilful use of a credit card.
• This is just a way to overcome the excessive charges that you could be charged for withdrawing cash from your credit card.
• Banks will have to provide a report to the Income Tax Authorities of all such customers who spend more than Rs. 2 Lakhs in the process of transferring money from a credit card to a bank account.
• You will be charged with a similar rate of interest if you make any default in repaying the credit card bill.

Bottom Line

Credit cards have become a convenient option to keep money handy. This fact cannot be denied that credit cards have saved us from carrying bundles of cash everywhere we go. But the places where credit cards are not accepted, there arises the need to transfer money from a credit card to a bank account. Even though there are certain terms and conditions to transfer money from a credit card to a bank account, it can still be done in case of emergencies. But as always said, excess of everything is bad, similarly in this case, if such transfers are done in excess amount, i.e., exceeding Rs. 2 Lakhs in a year, you may come in the eyes of the Income Tax Department.

These transfers are comparatively cheaper than withdrawing cash from your credit card as the cash advances charge a very high rate of interest. Various applications and e-wallets help us in performing such transactions and they charge their own fee for transferring money from wallet to bank account. Hence, only after considering the facts and risks behind transferring money from a credit card to a bank account, you should initiate these transactions only when in die-hard needs and remember to pay all the outstanding bills well on time.