Many people find themselves struggling to pay down their credit card debt. In fact, for the first time ever, credit card debt for Americans has shot up to 1 trillion.1 And 55% of Americans say they are either “very” or “fairly” concerned about their ability to pay off their credit card debt this year (2023).2
Suppose you are in the same boat and are looking for a way to manage your finances. In that case, you may wonder if paying off a credit card bill using another credit card is possible. Learn about your financial options and what you can do to pay down a high credit card balance.
Pay off a Credit Card Bill With Another Credit Card
Banks do not allow borrowers to pay off their credit card bill with another credit card. Most credit card issuers limit payment methods to checks, electronic transfers, and money orders for credit card bills. However, two payment methods allow you to make credit card payments using a second credit card.
Use a Balance Transfer Card to Pay a Credit Card or Credit Card Bills
A balance transfer is when you move an existing debt balance from one credit card to another to pay a credit card or to pay credit card bills. Typically, balance transfers occur between two credit card issuers. The benefit of balance transfers is that you can save money on interest fees if the second credit card has a lower interest rate.
Understanding how credit card APRs work can help you calculate how much you will pay for borrowing money and, ultimately, to pay a credit card. The best interest rate a borrower can get is a zero interest rate. Some credit card companies offer zero-interest introductory interest rates for new borrowers. An introductory rate usually lasts for a short promotional period—typically 12 to 18 months. Any monthly payments made during that time will directly affect the principal amount of credit card balances.
If your current credit card has an APR rate of 20% and a $5,000 balance, you can expect to pay $1,000 in interest fees. But what if you move debt to a balance transfer credit card with an introductory zero-interest APR rate? You can end up not having to pay anything in interest!
What Are the Cons of a Balance Transfer Card for Your Credit Card Bill or Bills?
While using a balance transfer credit card to pay a credit card or multiple seems like a great idea to pay down your credit card debt faster, you should know about some cons.
Balance Transfer Fees
You will be subject to a balance transfer fee when you transfer your credit card balance from one card to another. The cost of a balance transfer fee varies, but you can expect to pay a percentage of the total balance transfer.
The balance transfer fee typically ranges from 0% to 5%, although some credit card companies can charge more. If your transferred balance is $10,000 and the balance transfer fee is 4%, you will end up paying $400 just to pay one credit card with another.
Ongoing APR Rates
It may seem like a good idea to pay a high-interest card with another that has a zero-interest introductory period. However, you will be working against the clock. If you cannot pay the entire balance of your credit card before the 0% offer expires, you could end up paying more interest fees with your monthly payments.
Many people do not bother to verify the APR rate after the introductory period because they are confident they can pay off the principal balance within a few months. However, the new card issuer can have a higher APR rate than your previous one. If your credit score is on the lower end, you may not be able to secure a good credit card APR rate.
Credit Inquiries
Making too many inquiries within one calendar year can have adverse effects on your credit score. Credit inquiries account for 10% of credit scores. You may decrease your credit score by applying for too many credit cards. However, you may have to make multiple inquiries if you have a low credit score because you can be disqualified by many credit card companies.
Use a Cash Advance
A cash advance on a credit card means immediate funding to remedy a bad financial situation. Cash advance loans let borrowers withdraw cash from their credit line. While paying off a credit card bill with cash may seem like good economic sense, you may be digging a deeper financial hole for yourself.
What Are the Cons of Cash Advances?
A cash advance may offer quick financial relief. Still, you may be better off finding an alternative credit card payment method. Financial experts advise against using a cash advance from one card to pay another card. Read more about the cons of a cash advance:
| Drawbacks With Cash Advances | Description |
High APR Rates | Cash advances often have a much higher APR rate than purchases. The average cash advance APR rate is around 24.80%. A $2,000 cash advance at this rate can result in $496 in interest. |
High Service Fees | Credit card companies may charge a percentage-based service fee for cash advances. Service fees typically range from 3% to 5% or even higher. |
Low Cash Advance Limit | Cash advance limits are usually lower than your total credit line. A limit of $5,000 may allow only a $1,000 withdrawal, for example. |
What To Do if You Can’t Pay Your Credit Card Bill
If you struggle to make a credit card payment every month, reconsider using a credit card to pay another credit card. Alternative options can help you save money and avoid damaging effects on your credit score.
Work With a Credit Counselor
Consider working with a credit counselor if you need help establishing a budget plan. A non-profit credit counseling company could help connect you to a certified credit counselor that provides financial guidance. The National Foundation for Credit Counseling is an organization that offers free credit advice and debt management plans.
Use a Debt Consolidation Loan
If your credit card interest rates are exorbitantly high, you can try applying for a debt consolidation loan. One option may be a personal loan. Personal loan options can be found online or in person. There are also other types of loans you can use for debt consolidation. When you consolidate debt, you can obtain lower interest rates that make repayment much easier on your finances. If you have less than-perfect credit, know that there are balance transfer card options and debt consolidation options that are bad credit loans.
Contact Your Credit Card Issuer
Before your payment due date, reach out to your credit card company. Credit card companies typically are willing to work with you, offering solutions like a temporary reduction in your interest rate, a waiver of late fees, or a modified payment plan.
Review Your Budget
Take a close look at your monthly expenses and determine what non-essential costs you can cut temporarily. By redirecting funds from less critical expenses, you might be able to make at least a minimum payment on your credit card. If you can make more than minimum payments, that can be extremely helpful.
Prioritize Payments
If you have multiple debts, prioritize them. Essential bills like mortgage or rent, utilities, and groceries should come first. Then, focus on paying off high-interest debt, such as credit cards.
FAQs
Companies offer these promotions to attract new customers, hoping that after the promotional period ends, the customer will carry a balance and generate interest revenue for the company. It’s also an opportunity for them to acquire customers who might utilize other services or continue using the card for purchases.
If you miss a payment during the introductory period, you may lose the promotional interest rate. This could result in a higher interest rate being applied to your balance immediately. Additionally, late fees may be applied, and the missed payment could negatively impact your credit score.
Typically, balance transfers and cash advances do not earn reward points, miles, or cash back. It’s also worth noting that these transactions often come with their own set of fees, which can offset any potential rewards from other transactions.
A balance transfer can impact your credit utilization ratio in multiple ways. Suppose you transfer a balance from a nearly maxed-out card to a new card with a higher limit and keep the old card open without accumulating additional debt. In that case, your overall credit utilization can decrease, which may positively affect your credit score. However, if you close the old card, it might not have the same positive effect.
Yes, some credit cards offer promotions with no balance transfer fees. However, these offers are typically accompanied by other conditions, such as a shorter promotional period or a higher post-promotional interest rate. It’s essential to read all the terms and conditions.
While most companies allow balance transfers only between cards in the same person’s name, there are some that might permit a balance transfer from someone else’s card to your card. However, the person with the debt remains responsible for repayment, even if the balance is on someone else’s card.
The processing time for a balance transfer varies by issuer. Typically, it can take anywhere from a few days to a few weeks. It’s essential to continue making payments on the original card until you confirm that the transfer has been completed to avoid late fees or additional interest.
No, transferring a balance from one card to another does not automatically close the old card. If you wish to close the old card, you’ll need to contact the issuer directly. However, before closing, consider the potential impact on your credit score, particularly regarding your credit history length and credit utilization ratio.
Yes, many card issuers allow you to transfer balances from multiple credit cards to a single new card. The main constraint would be the credit limit on the new card – you can’t transfer more than the available credit limit. Always read the terms and conditions, and remember that each transfer might have associated fees.
If you don’t pay off the total balance before the promotional APR period ends, any remaining balance will start accruing interest at the standard rate for the card. This standard rate is often higher than the promotional rate and can lead to significant interest charges if not addressed quickly. Ensure you’re aware of when the promotional period ends to avoid unexpected interest.
CreditNinja’s Conclusion
Navigating the complex landscape of credit cards can be overwhelming, especially if you have used multiple for installment buying. While paying off one card with another might seem like a quick fix, it’s essential to understand the potential benefits and drawbacks. Whether you’re considering a balance transfer, cash advance, or seeking alternative solutions, always prioritize informed financial decisions.
CreditNinja is here to guide you through your financial journey, ensuring you make choices that align with your financial well-being. Always remember: Knowledge is power, especially when it comes to managing your finances.
References:
- Americans’ credit card debt hits a record $1 trillion | CNN Business
- Struggling With Credit Card Debt? So Are Millions of Americans | Newsweek
- Cash advances: How they work and what they cost | CNET
- Can You Pay a Credit Card Bill With Another Credit Card? | US News
- What Is A Schumer Box And How Do I Use It? | Forbes
- Should You Use One Credit Card To Pay Off Another? | Forbes
