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The quick answer is no, not directly. Credit card companies don’t typically allow you to use another credit card to directly pay a credit card bill. It doesn’t make sense for them because, if they accepted another credit card as payment, they would have to pay the merchant fee of 2 to 2.5 percent on the payment amount which decreases their profit.
Why do that when they can earn full profit by just accepting checks or debit card payments? There are ways, however, to indirectly use a credit card to pay off another credit card. So, when asking can you pay a credit card with a credit card, you’ll want to make sure it makes sense for you, and whether you want to eat the cost.
Here are a few ways you can pay off your credit card with another credit card.
Take a Cash Advance
Most credit cards offer a cash advance feature that allows you to withdraw cash either over the counter or from an ATM. This function can be used to tackle another credit card’s bill.
Here’s how it works. You take out a cash advance on one card, and then you deposit the funds into your checking account or whatever account is linked to your due credit card. Once that is done, you pay off your bill. Now, you are done with that credit card payment. While one card is paid off, there are a couple of caveats to keep in mind.
Cash advances aren’t free in a couple of different ways. For starters, you need to pay back whatever amount of cash you withdraw. On top of that, you’ll owe interest on top of the cash amount. Cash advance APRs typically reside in the twenty percentile range. Assuming an APR of 25 percent, a $100 cash advance would cost you at least seven cents a day if you don’t pay it off quickly.
Furthermore, cash advance transactions usually come with another separate fee on its own. This fee is usually a flat $5 or $10, but sometimes it’s taken as a percentage, either 5 or 10 percent. Whichever value is greater is chosen. So if you take out $100, you’ll have to pay a $10 fee.
With its high cost, it’s hard to imagine a cash advance to pay off another credit card would improve your position. The only time it might make sense is if you need the cash to avoid a missed payment; but even then, it should be used sparingly and repaid as soon as possible.
Use a Convenience Check
Some credit cards are issued with convenience checks. These are like normal bank checks except they are written on your credit card account. If you want to use one to pay off another credit card, you would have to make the check out to “cash” and deposit it into your checking account (credit card issuers won’t accept convenience checks from another credit card issuer).
In terms of convenience, they are great; but in terms of costs, they are no different than a cash advance. The interest rates and fees are similar to a cash advance, and there is no grace period on interest charges, just like a cash advance.
All you are really doing when you use a convenience check or cash advance to pay off a credit card is swapping one high interest debt for another. You are trying to solve a problem, not make it worse. About the only time it might make sense to use a credit card to pay off another is when you can use a balance transfer offer, but even those sometimes come with several caveats.
Using a Balance Transfer Card to Pay Off Another Credit Card
If you have fairly good credit, you might be able to qualify for a zero- or low-interest balance transfer credit card. Balance transfer cards come with an introductory or promotional period which can last from 6 to 21 months, during which you pay no interest charges. If you can get one of these cards, then you can transfer your balance over and start paying down your balance without the worry or burden of interest.
However, even this isn’t free. With most balance transfer cards, you will still pay a 3 to 5 percent balance transfer fee which can be significant if you have a high balance. All that aside, you should still be able to make better progress without that pesky interest.
While in theory this type of credit card allows you to pay off your balance more quickly, it’s not a guarantee, but that depends on you. If you fail to pay the balance transfer off before the end of the introductory period, you will likely owe retroactive interest on the original balance at a much higher interest rate. Furthermore, if you just keep spending like crazy on one or both of the cards, then you’ll end up right where you started or worse off.
To make a balance transfer card work in your favor, you must do everything you can to pay off the balance as quickly as possible within the introductory period.
Author: Jeff Gitlen, CEPF®
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