Using One Credit Card To Pay Off Another – Is It Possible?

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There are a lot of things you can do, like eat sushi from the petrol station or go on a walk by yourself at night, but the better question is – should you?

Using one credit card to pay off another is technically possible, however it’s usually not the best option available. But let’s pretend for a minute that you wanted to just go for it – how would it actually work?

Cash advances

Most credit cards won’t let you pay your bill directly with another credit card, however you can take out what’s called a cash advance. A cash advance, as you might have suspected, is cold hard cash issued through your credit card provider either at your local branch, ATM or super market. While this sounds convenient, there are usually some pretty hefty fees that accompany your cash advance, so you’ll want to take those into consideration.

There is an initial fee to withdraw the money, either a flat fee off the top or a percentage based on how much you withdraw. In Australia, cash advance fees are generally around 3% or $5, whichever is greater. While this doesn’t seem too sinister, remember you are adding to your overall credit card balance when you take a cash advance, therefore increasing your total interest rate over time.

While a cash advance may solve your problem temporarily, you are essentially just shuffling your debt from one creditor to another and increasing your debt in the long term – ouch.

Consider a balance transfer instead

Another option to consider is a balance transfer, which allows you to transfer the balance of your credit card to a new card with a 0% APR promotion. There are a few that offer twelve months interest free, however you need to have excellent credit in order to score this deal, and there is of course a fee involved. Most creditors charge between 3 and 5%, so it’s worth considering whether this additional fee is something you can afford to pay back in addition to your existing balance.

You’ll also need to think about whether or not you’ll be able to pay off your card by the end of the introduction period. If not, your interest rate will jump quite aggressively. A late payment may also mean you lose your 0% interest rate, so you’ve got to be diligent if you chose this option and pay your card on time.

Another thing to watch out for with balance transfers is their terms and conditions. Some cards, if not paid back during the introduction period, will back date the interest all the way back to the balance transfer, which may end up costing you more than you bargained for.

Bottom line

Technically yes, you can use one credit card to pay off another, but in terms of options it should be at the very bottom of your list. It’s one of those short term solutions that may end up hurting you for years to come, and you deserve much better than that! Debt agreements or informal payment arrangements may be better options, as neither will put you further into debt. Just remember that there are many other solutions available to you that won’t increase your credit card debt in the process.

If need help paying down your credit card debt and you’re not sure where to turn, give one of our friendly team members a call at 1300 368 362. We’ve helped thousands of Australians find their way out of debt and we can help you too.

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