The Hidden Risks and Rewards of Balance Transfers One Credit Card with Another

Learn how to use balance transfers and cash advances to pay off one credit card with another. Understand the risks, fees, and impact on your credit score.

Normally, credit card companies won’t let you pay your bill with another credit card. But, there are two tricks you can try:

Balance Transfer

This is when you move what you owe from one card to another. It helps you put all your debt in one place. Sometimes, you can get a special deal, like not having to pay interest for 18 months, which helps you save money and clear your debt faster.

After you transfer the balance, the old card’s debt is fully paid.

Cash Advances

This means you take some of your credit card‘s limit in cash. You can then use this cash to pay off another card. But, doing this can be expensive because of fees and high interest rates.

5 Important Points When Using Credit to Pay Another Card

1. It Might Affect Your Credit Score
   Taking a cash advance uses up your credit limit, which can hurt your credit score. Also, if you transfer a balance to a new card, the process of opening a new account can lower your score too.
2. Fees Can Add Up
   Paying one card with another sounds good to avoid late fees, but you’ll have to pay extra charges. Balance transfer fees are usually 3-5% of the amount you transfer. Cash advance fees are typically 5% or $10, whichever is more.
3. Higher Interest Rates
   Using these methods might lead to higher interest rates. Cash advances often have higher rates than normal purchases. And if you do a balance transfer, the low interest rate only lasts for a short time before it goes up.
4. Interest Starts Right Away
   Normally, if you pay your credit card bill on time, no interest charges. But, cash advances start collecting interest the moment you get the money.
5. You Could End Up in More Debt
   Using a credit card to pay off another can be tempting if you’re struggling to keep up with payments. But, this can just add more to what you owe because of the extra fees and high interest, making it harder to manage your money.

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Other Ways to Pay Your Credit Card

While you can use a balance transfer or cash advance, there are better ways to handle your debt:

• Talk to Your Credit Card Company
  If you’re having trouble paying, reach out to your credit card issuer. They might have options to help you, like skipping a payment or lowering your interest rate.
• Consider a Debt Consolidation Loan
  If your credit is good, you might get a loan to pay off your cards. This loan can have a lower interest rate, making it easier to manage your payments.
• Meet with a Credit Counselor
  If you’re really struggling, talking to a credit counselor can help. They can look at your finances and help you come up with a plan to pay off your debt.

FAQs on Using Balance Transfers and Cash Advances to Pay Off Credit Cards

Q1: Can I pay my credit card bill with another credit card?

A1: Directly, no. Credit card companies usually do not allow you to pay off one credit card with another. However, you can indirectly do so through balance transfers or cash advances.

Q2: What is a balance transfer?

A2: A balance transfer involves moving the amount you owe on one credit card to another. This can consolidate your debt onto a single card, potentially with a lower interest rate or a promotional period with no interest, helping you save money and pay off your debt faster.

Q3: What is a cash advance?

A3: A cash advance allows you to use part of your credit card’s limit to obtain cash, which you can then use to pay off another credit card. Be cautious, as cash advances typically come with high fees and interest rates.

Q4: How do balance transfers and cash advances affect my credit score?

A4: These methods can impact your credit score negatively. Taking a cash advance can increase your credit utilization ratio, potentially lowering your score. Opening a new account for a balance transfer can also affect your credit score by reducing your average account age.

Q5: What fees are associated with balance transfers and cash advances?

A5: Balance transfers usually incur a fee of 3-5% of the transferred amount. Cash advances often have a fee of 5% or a minimum amount, whichever is higher, in addition to possibly higher interest rates.

Q6: What are the interest rates for balance transfers and cash advances?

A6: While balance transfers may offer low introductory rates, these rates are temporary. After the promotional period, the interest rate can increase significantly. Cash advances typically have higher interest rates than regular purchases from the start.

Q7: When does interest start accruing on cash advances?

A7: Interest on cash advances begins accruing immediately, unlike regular credit card purchases where you might have a grace period if you pay your bill on time.

Q8: Can using these methods to pay off credit cards lead to more debt?

A8: Yes, because of the additional fees and high interest rates, relying on balance transfers or cash advances without a solid repayment plan can lead to accumulating more debt.

Q9: What are some alternatives to paying off credit card debt?

A9: Instead of using one credit card to pay another, consider contacting your credit card company for assistance, applying for a debt consolidation loan with lower interest rates, or seeking advice from a credit counselor to manage your debt more effectively.