MOVED Can You Pay Off 1 Credit Card With Another? It's Complicated

Posted by Lyle Daly on Jan 1, 2020 6:00:00 AM

There's no direct method, but there are a couple of indirect options.

If you have multiple credit cards, you've probably wondered at some point whether you could just use one to pay off the other.

Plenty of consumers ask this question because there would be obvious benefits if the answer was yes. It would be easier to manage when money's tight, and better yet you could earn rewards on one credit card by using it to pay another card's bill.

Woman choosing and removing one credit card from a set of three.

Unfortunately, you can't earn rewards that way. And when you're paying a credit card bill, there's no way to add another credit card as a payment source. There are two potential workarounds -- but only one of them is a good idea.

Balance transfers

If you want to pay one credit card with another, the smart method is a balance transfer. To do this, you'll either need to log in to the online account or call the card issuer of the card you want to use for payment. You'll then provide the card number for the credit card with the balance you wish to transfer over, as well as the amount to transfer.

There are a few things to keep in mind with balance transfers. Not all credit cards offer this option, and among those that do, many charge a small balance transfer fee. Some cards have limits on the amount you can transfer to them. Even if a card doesn't have a balance transfer limit, your transfer amount and any transfer fee can't total more than your credit limit.

Consumers typically use this method to get a lower interest rate on their credit card debt, often opening balance transfer cards that offer 0% introductory APRs for a set period of time. 

If you can't pay your credit card bill in full and you have a good credit score, one of these cards can help you save money on interest. You'll need to make minimum payments, but you won't have interest charges piling up, at least during the card's introductory period.

Cash advances

The alternative route is to get a cash advance on one credit card, and then use the money to pay your other card's bill. Most credit cards offer cash advances, although cash advance limits are usually much lower than the card's total credit limit. You will also need to pay a cash advance fee on any amount borrowed using this method.

The reason why getting a cash advance from your credit card is such a poor decision is the interest. Credit cards have separate cash advance APRs, and these APRs tend to be much higher than the standard purchase APR.

To make it even worse, there's no interest-free grace period with cash advances. For purchases, credit card companies must give you a grace period of 21 days before charging any interest. This is because of the CARD Act of 2009. That law doesn't apply to cash advances, so credit card companies can start charging you interest on those immediately.

It's never a good idea to get a cash advance, and it also doesn't make any sense to use a cash advance to pay another credit card bill. You'd be better off making a minimum payment and carrying the balance on the original card for the time being. You'll pay interest, but at least it will be at the purchase APR and not a higher cash advance APR.

What to do if you can't pay your credit card bill

If you can't pay your entire credit card bill, the right move will depend on the amount you owe.

For credit card debt that you won't be able to repay within about three to six months, a balance transfer is the way to go, assuming you can qualify for a balance transfer card. But if you're confident you can pay off all your credit card debt relatively quickly then it could be best to simply focus on paying it down as fast as you can without transferring the balance.

And while a cash advance may initially seem convenient, the fee and the interest you'll pay mean you should avoid this option at all costs.

Topics: Credit Cards, Balance Transfer

MOVED 4 Reasons You Still Have Credit Card Debt

Posted by Kailey Hagen on Dec 29, 2019 8:00:00 AM

You can get out of credit card debt, but you may need to change your approach.

Credit card debt is financial dead weight. It costs you a lot of money without offering any real benefit and can be really hard to get rid of once you get into it. Many people try to break out of the debt cycle but fail to do so, usually for one of the following reasons. If any of these apply to you, consider switching up your strategy to start seeing some real progress.

Young woman anxiously chewing on credit card while looking at phone.

1. You're spending too much

When you're trying to pay down credit card debt, you should reduce your credit card usage to prevent your balance from growing any further. You should also reduce your spending overall to free up more cash for debt repayment. If you're spending indiscriminately without giving any thought to your credit card debt or its long-term impact on your financial security, your debt problems will likely get worse over time instead of better.

Switch to cash instead of credit cards where possible and create a budget for yourself, cutting out unnecessary expenses like dining out. Put all the extra cash you save each month toward your debt repayment until it's paid off.

2. You're only making the minimum payment

It is possible to pay off your credit card debt by making the minimum payment, but only if you don't charge any more to the card and have a decade or two to spare. It can take years to pay off your credit card debt if you're only making minimum payments, and you'll probably cost yourself thousands of dollars in the process. If you want to make real headway, you have to start paying more than just the minimum each month. 

3. You're not using balance transfer cards

Balance transfer cards are one of the best ways to pay down credit card debt because they temporarily halt your interest payments, and so stop the growth of your debt. They give you a 0% APR for six to 21 months, depending on the card. You will pay a fee to complete the transfer, often a percentage of the balance you’re transferring, and if you cannot pay it all back before the introductory period is up, your remaining balance will begin to grow at the standard APR.

Balance transfer cards are a one-time-only opportunity, so you must be serious about paying down your debt if you're going to use them. When the introductory APR period expires on a card, you can never get it back again. If you have poor credit, this option might be off the table because your application may not be approved. In that case, try the next tip instead.

4. You're not targeting one card at a time

Targeting one card at a time is your next-best option if you're unwilling or unable to open a new credit card or take out a personal loan to cover the balance. This strategy involves making the minimum payment on all your cards to avoid late fees and then putting any extra money you have toward the card with the highest interest rate. When this balance is paid off, you throw all your money at the card with the next-highest interest rate, and so on, until you're debt-free.

It takes time, but this approach will minimize the amount you pay in interest overall. You can speed things up by limiting how much you charge to your credit cards so that your balance doesn’t grow any further.

Once you're out of debt, don't go back to the bad habits that got you there in the first place. Understand the causes of your credit card debt and take steps to ensure that they don't happen again -- such as creating an emergency fund to cover unexpected expenses. 

Even if you use the above strategies, it will probably take you several months to a few years to get out of credit card debt depending on how much you’ve taken on, but don't let that discourage you. Getting rid of your credit card debt will reduce your stress, increase your financial security, and probably help your credit score, too, so it's well worth the effort.

Topics: Credit Cards, Balance Transfer