Credit card funding is the process of using your credit card to add funds into a new bank account.
Funding a new checking account or savings account with a credit card can provide some added financial benefits but isn’t without risks.
Keep reading to learn all about credit card funding: popular banks that allow it, what to watch out for, and more.
When Does Credit Card Funding Make Sense?
When you sign up for a new credit card or open a bank account online, you may be able to cash in on promotional bonuses (assuming you hit the minimum qualification requirements).
For example, rewards credit cards often come with a large sign-up bonus in points or cashback. But you almost always have to hit a certain spending threshold within the first three months of opening the card.
Similarly, many bank accounts offer a cash bonus for hitting an initial funding benchmark. After that, the requirements vary from bank to bank. Most often, you to hit need a minimum initial deposit requirement and spend a certain amount on your debit card.
Sign-up bonuses like these are great, but spending requirements are often in the thousands, making them tough to achieve without spending beyond your means. Likewise, if you don’t have the cash on hand to meet a minimum deposit requirement, you might be missing out. This is where credit card funding comes into play.
Credit Card Funding: The Basics
For starters, you have to find the right credit card for making bank deposits without getting hit with cash advance fees (more on that later).
When you do find the right card that you fund your new bank with, your credit card issuer regards the deposit as a purchase like any other. This means that the purchase counts toward your credit card balance. Depending on the card, you may also earn bonus and reward points.
At the same time, you can meet the minimum opening deposit requirement for your new bank account.
How It Works
The key to successfully funding a bank account with a credit card is to choose the right bank and use the right card.
Some banks, like Bank of America, won’t let you fund any account with a credit card. Additionally, other credit card issuers, like Citibank, are notorious for flagging any credit card funding as a cash advance rather than a purchase. I’ll cover why this is something that you want to avoid shortly.
To give you a better idea of what successful credit card funding could look like, here’s a hypothetical scenario:
Maya applies for a new credit card that offers $500 worth of rewards points if she spends at least $2,000 in the first three months after opening. The card offers 1% cashback on all purchases and comes with a 0% APR on balance transfers for the first 18 months. Simultaneously, Maya finds a checking account that offers a $300 bank bonus if she makes an initial deposit of $1,500 or more and maintains that balance each statement period for 90 days.
Maya is in a pretty good spot to use credit card funding, assuming that both her credit card issuer and the bank allow for it. If she makes an initial bank deposit of $2,000 with her credit card, she’s in line for both $500 worth of rewards points, plus an additional $20 in cash rewards from her new credit card. She can also collect the $300 cash bonus from her new bank.
It may sound like easy money, and it can be with the right plan in place. But you could also get into trouble if you aren’t careful. With that in mind, let’s review some things to be mindful of if you decide to take this route.
Top Things To Look Out For
The only real reason to fund a bank account with a credit card is to cash in on rewards and bonuses that would be otherwise difficult to get. But the last thing you want to do is put yourself in a compromising financial position while trying to chase down sign-up bonuses.
With that said, if there’s even a chance that funding an account with your card can cause financial stress, don’t do it. A $200 bonus is not worth the risk.
Here are some other major considerations:
Cash Advance Fees
Most credit cards have fees associated with cash advances. Whether or not your bank account deposit is considered a cash advance depends solely on your credit card provider’s policies. If your deposit is coded as a cash advance rather than a purchase, you’ll probably have to pay hefty fees.
Interest On Credit Card
If you’re unable to pay back the money you spent for the deposit, you’ll pay interest fees on your outstanding balance. The good news is that many credit cards offer a low or non-existent interest rate as an intro bonus, so you’ll have some extra time to pay it off. Don’t delay, though.
Always pay off your credit card balances in full each month because you never know what life will throw at you.
Late Payment Fees
Just like interest, if you aren’t able to make payments on your new credit card, you’ll get hit with late payment fees. Falling behind on your credit payments is a slippery slope that you should avoid at all costs.
Minimum Balance Requirements
Many bank accounts require you to keep a certain amount of money in the account every month to avoid fees. As a result, your cash gets tied up in the account if you want to avoid fees.
Many of the bigger banks have monthly maintenance fees on checking and savings accounts. Some banks waive checking account fees if you meet the minimum balance requirement, while others may require a direct deposit. Credit card funding does not qualify as a direct deposit.
Risk vs. Reward
The risk associated with credit card funding is the same as any situation where you use a lender’s money to buy something. Interest on unpaid balances, late payment fees, and racking up debt are the biggest pitfalls to watch for.
If you fund an account for more than you can afford to pay back, expect to be hit with interest fees that can wash out your return. Similarly, if you end up having to pay a cash advance fee, the sign-up bonus all of a sudden isn’t so great.
Approach credit card funding with a clear plan so that you can avoid interest-bearing debt. Also, be sure to fully understand the requirements of both your bank and credit card.
To ensure that your deposit isn't coded as a cash advance, call your credit card company ahead of time and set your cash advance limit on the card to $0. That way, even if the deposit is flagged as a cash advance rather than a purchase, the transaction just won't go through.
Which Banks Allow Credit Card Funding?
Not all banks and credit cards allow for credit card funding. Even within the same bank, some account options allow it while others don’t. Banks may also only allow for funding from certain credit cards, and the way that the deposit is coded is entirely at the discretion of both the bank and the credit card issuer.
Here’s an overview of the bigger financial institutions that allow you to fund your account with a credit card:
Chase Bank allows for credit card funding for amounts up to $500. However, many credit cards are coded as a cash advance with Chase accounts, meaning that you could be looking at cash advance fees from your credit card issuer.
Santander Bank allows for credit card funding up to $500 and accepts a wide variety of credit cards for funding, including Chase Freedom and Chase Sapphire Preferred.
3. Wells Fargo
Wells Fargo allows for credit card funding, but the limit is quite low at only $50. Wells Fargo does accept American Express (Amex) or Discover for credit card funding, but you can use a Visa or Mastercard.
BBVA has one of the higher credit card funding limits at $5,000. Unfortunately, the credit cards that qualify for non-cash advance deposits are relatively limited.
At the time of this writing, it appears that only the Bank of America (BoA) Alaska Airways/British Airways card and the Citi AA card are going to work.
BBVA does allow for funding from several Chase and Capital One cards, but those are coded as cash advances.
5. TD Bank
TD Bank allows credit card funding up to $1,000. BoA Cash Rewards, Citi AA/Hilton Honors Visa, and US Bank Flex Perks are some of the top cards it accepts.
6. U.S. Bank
U.S. Bank allows for funding up to $500 with a credit card and has an extensive list of popular qualifying cards. For example, you can fund the account with the Barclay Arrival, Barclay Aviator, Capital One Quicksilver, Capital One Venture, and Chase Amazon card.
Tons of other options exist. The above list is by no means exhaustive, and you may find that you have better luck with smaller, regional banks or credit unions.
You should also take note of the disclaimer that none of these policies are set in stone. Banks who previously allowed for credit card funding may have since stopped, or, like PNC Bank, some have recoded all credit card deposits as cash advances.
Always read the fine print, and be sure to know what you’re getting into before making any moves.
Frequently Asked Questions
Next, let’s take a look at some of the most common questions that we hear about bank account credit card funding:
Is credit card funding legal?
Yes, credit card funding is a legal practice that many banks and credit cards accept. Some banks will have restrictions on which credit cards they’ll allow you to fund with, and some credit card companies may not allow for it, but this is at the discretion of each institution. Along with credit cards, some banks also allow for funding with prepaid gift cards.
Does credit card funding affect my credit score?
In itself, the act of credit card funding or opening a bank account doesn’t affect your credit score. But beware: you can run into credit issues if you don’t have an airtight plan. First of all, if you open a new credit card to fund your new bank account, this could slightly drop your credit score, as is the case with any hard credit inquiry that you run.
Most people shouldn’t worry about this because the slight point reduction should rectify within a few months — if you continue to stay on top of things. However, if you are planning to make a home purchase soon, you don’t want your credit score to drop even by a few points because it directly impacts your mortgage rate.
How much your rate might be affected is hard to say, but the safe bet is to completely hold off on running any hard credit inquiries until after you close on your new home. You can also run into trouble with your credit utilization rate, which is the amount of available credit that you have. This is one of the biggest factors in determining your credit score.
If you don’t pay back to money you borrowed to fund your new account, your credit utilization rate goes up, which can negatively impact your score over time. To avoid this fate, make sure you have a plan to pay off any credit balances that you rack up.
How do I know if a bank accepts credit card funding?
Banks are usually transparent about whether or not credit card funding is an option. Generally speaking, banks want your deposits and make all of your options clear to you upon account opening.
What’s not always so clear is will a credit card deposit be considered a traditional deposit or a cash advance. Figuring that out might take a little bit of digging. Do your research, and don’t hesitate to call and ask the bank before signing up.
The Bottom Line
While credit card funding can be an easy way to pocket some quick cash, it’s a strategy that you have to be very careful implementing because it can lead to credit issues, debt, and headaches if you’re not careful.
With that said, I only recommend trying it if you are extremely detail-oriented and responsible at making payments on time. You should also have a solid cash flow and emergency fund saved up, which can serve as a safety net to your plan if something goes wrong.
If you have concerns that you might be biting off more than you can chew, you are probably better off investing your money in long-term growth funds or just keeping it in a high-yield savings account.
As always, don’t sign up for anything you don’t understand, and go with your gut. If you do those things, you’ll be on the right track.