Can You Transfer an Overdraft to a Credit Card? Answered

Can I Transfer an Overdraft to a Credit Card?

If you don’t have the funds to cover an overdraft right away but you want to avoid overdraft fees, you may be able to use a credit card to cover your negative balance. There are two ways to do this: use a credit card issued by your bank, or get a cash advance from your credit card and deposit it in your checking account.

Credit Card Overdraft Protection

If you have a credit card that is issued by your bank or credit union, you’ll usually be able to link the card to your account and transfer funds between the credit card and your other accounts with the bank. Many banks offer this as a form of overdraft protection, and you can usually link the accounts online.

Once you’ve linked your accounts, you can transfer funds up to your available credit limit into your checking account to cover a negative balance. This is treated as a cash advance on your credit card, which usually comes with higher fees and interest rates than normal credit card use.

Note that your bank or credit union may also charge additional fees for transfers from your credit card to your checking account. For example, Wells Fargo charges an additional Overdraft Protection advance fee for these transfers; the fee amount varies based on the amount of the transfer. Your bank must disclose these fees in your deposit agreement, according to the Consumer Financial Protection Bureau’s FAQs on bank accounts and services.

It’s important to keep in mind that banks and credit unions will generally allow this type of direct transfer only with credit cards they have issued, and only for your own accounts. If you have credit cards issued other banks or financial institutions, you typically won’t be able to link them directly to your checking account. We confirmed this by speaking with associates from several major U.S. banks, including Bank of America, Chase, Citibank, KeyBank, PNC, and Wells Fargo.

Credit Card Cash Advance

If you’re unable to link your credit card to your checking account, you can pay overdraft balances indirectly by getting a cash advance from your credit card. As noted above, cash advances typically come with a fee that is either a flat rate or a percentage of the advance amount. You will also likely incur a higher interest rate for cash advances than for regular purchases with your credit card.

You can get a cash advance from your credit card at the issuing bank or financial institution, or any ATM, provided you have a PIN. If your credit card did not come with a PIN for cash advances, you can typically call your credit card company to set one up.

The fastest way to use a credit card cash advance to cover an overdraft balance is to withdraw the cash advance at an ATM owned by your bank, then deposit the cash directly into your checking account. This can be especially useful if you’re able to deposit the cash advance on the same day your checking account is overdrawn. Many banks and credit unions won’t charge an overdraft fee if you cover the negative balance before the next business day.

Should I Cover an Overdraft With a Credit Card?

If you are able to pay your credit card balance promptly, it can make sense to pay overdraft balances with a credit card. The initial cash advance and transfer fees may be lower than the overdraft fees, which are typically around $30 to $40 per overdraft transaction. (Our related research has more information about each bank’s overdraft policies.)

However, if you won’t be able to pay down your credit card balance quickly, using it to cover overdrafts may cost you more in the long run. This is because, as mentioned above, credit cards usually charge a higher rate of interest for cash advances than for regular purchases. Also, the interest begins accruing immediately on cash advances, rather than at the start of the next monthly billing cycle.

Other Overdraft Protection Options

If you do not want to use a credit card to cover overdrafts, most banks will allow you to link another type of account. Typical overdraft protection options include linking a second checking account, a savings account, or a line of credit. You may still be subject to transfer fees, but you will avoid credit card cash advance fees and usually will not accrue interest. (A line of credit will accrue interest, but usually at lower rates than credit card and overdraft fees.)

In Summary

You can use a credit card to either transfer funds directly to your checking account (if your card is issued by your bank) or get a cash advance that you can then deposit into your checking account to cover a negative balance. This can help you avoid overdraft fees and can be a useful option if you repay your balance quickly, but you will incur transfer fees, cash advance fees, and high interest rates. Other overdraft protection options include linking another checking account, a savings account, or a line of credit.

Want to know more about credit cards? You may be interested in our list of the different types of credit cards. You can also find out how to get a credit card limit increase without asking.