A recent phone call from a friend asking a question for another friend prompted my consideration as to the ins and outs of whether one credit card can be paid off with another credit card. My immediate thought was, well sure this is possible. But not talking directly to the friend’s friend, I couldn’t ask the questions that started flooding into my head in order to better assess the full situation to give a solid response to fit the friend’s goals. So, I simply said that it’s possible, but to tell the friend to do some research online about the ins and outs of it before doing it, and to call me if we needed to talk further.
So why might someone even want to pay off one credit card with another credit card? Perhaps some of these reasons come to light in such a discussion:
– An individual might think that “consolidating” debt in this manner would be a good way to get out of debt.
– One might have a new credit card with “perks” – points, mileage or funds returned for dollars charged – that might make a person consider if this would be a good idea.
– Or someone might calculate that a new credit card with a no fee and no interest deal for a certain period of time would be a reason to avoid interest and fees on an already charged up card, sort of give that person a chance to “start over.”
While any of these reasons could be valid enough to consider such a transaction, most financial counselors and experts would caution that it’s wise to really think the decision through before paying off a credit card this way; and here’s why.
1. If a consumer is in debt with multiple credit cards, a plan of action to deliberately and wisely pay off that debt should first be crafted before any potential short term only solutions are accessed. If the debt situation is serious enough, payments are being missed, no progress is being made due to minimum payments and subsequent interest piling up, before this consumer does anything, he or she should consider contacting a non-profit credit counseling service, such as Consumer Credit Counseling Services (find one nearby via www.nfcc.org), for another set of eyes on the situation. In such an engagement with a financial coach, a clear assessment of the entire financial situation will allow for a sorting out of all options and alternatives to resolve the debt issues and to establish realistic timelines to do so. Often, once debt starts piling up and progress is very slow or non-existent, discouragement and embarrassment may set in to the extent that rational solutions may not be as apparent.
2. If the possibility of gaining a large number of perks, points, or rewards is attractive and there is other but debt that is not overwhelming or out of control, then the pay off one with the other scheme might be a valid one to think about.
3. If the lure of having a new card with no fees and no interest for a few months gives the individual some hope they can then make more progress in an overwhelming debt situation, then it would be wise to match this approach with a hard, realistic look at spending and budgeting and adding to it a steel spine approach to not go back to using the other card(s) again.
So, if these considerations and thoughts are still leaving an individual eager to indeed pay off one card with another card, then there are a couple of legit ways that this could happen.
First, one could get a cash advance from one card to pay off the other. However, there will likely be fees and additional interest assessed on this transaction that need to be considered. In addition, there may be limits as to the amount of cash advance that can be taken within certain periods of time (day/month) depending on the lender/creditor’s rules and the current financial state of the consumer.
A second option could be to use one of the checks often enclosed with a credit card statement provided to pay off another debt. Again, there may be limits to the amount allowed daily or monthly and extra fees and interest assessed for such a transaction. In both option one and two, be sure the fees and/or interest amounts make it a sensible decision before taking the plunge.
Thirdly, the option to do an online “balance transfer” may be available – once again, take caution and ask all the right questions to avoid negative results that may not be readily apparent. If it looks too good to be true, it may be too good to be true. There are mistakes to avoid as chronicled in the following article: http://clark.com/personal-finance-credit/6-mistakes-that-will-turn-a-balance-transfer/
At the end of the day, consumers are to be applauded for asking professionals for answers to questions not encountered previously. But additional research and interactions may be a wise decision in order to resolve problems that are persisting when it comes to money and debt in particular. Learning about managing money is a lifetime commitment. In essence, each consumer is basically required to do this research alone and sometimes make the best guesses. There are many professionals and resources to provide assistance. Thank goodness this inquirer asked first!