Can I Use a Credit Card to Pay Another Credit Card?

By Jade Balle

  • Overview

    When people are struggling to make their credit card bills, the law of "survival of the fittest" comes into play. There are some situations when a credit card holder will find that the only way to pay one credit card bill is to use another credit card balance. This is definitely worth discussing.
  • You Usually Can't Charge It

    Many credit card companies do not accept a credit card for payment at their sites. In most cases, the only way that you can make a payment on a credit card is by either sending in a check or money order, or doing an ACH (automated clearinghouse) payment online or over the phone. This is either because the credit card company doesn't want to risk having the payment disputed in the future, or because the creditor does not want to be part of a situation where they are continuously paid off with OPM (other people's money).
  • Balance Transfers

    Generally, a credit card company will not want you to pay them using another credit card. But they may be more receptive to a balance transfer to pay off the card in full, as opposed to small payments over time. Balance transfers are a way to use one credit card to pay another credit card off. The originating company will usually give you a better interest rate than what you are getting with your other company to bring more of your business their way. They'll take the other creditor's information and pay them off directly. Also, as mentioned earlier, many credit cards will only accept a check, money order or electronic ACH for payment. When a credit card holder deposits a balance transfer check from one credit card they can later use the same deposited money to pay off another creditor. So it is completely plausible for a consumer to pay one credit card using another in this manner.

  • Calculations

    So what would happen if you just continuously bounce payments from card to card? The answer depends on what your interest rates are for each credit card. Say you have an APR of 10 percent on one card with a balance of $5,000, while you have a 20 percent interest rate on another with $5,000. Whenever you pay the 10 percent card using the 20 percent card balance, and then do the reverse on a monthly basis, you would be losing money at a rate of up to 10 percent--possibly more if you consider balance transfer fees--annually on those payments (this is assuming you do not pay off the balance before each billing cycle is up). You have to do your own personal calculation depending on your account balances and interest rates to figure out how much you money you are losing by paying one credit card with another on a regular basis. You also have to figure balance transfer fees into this equation.
  • Credit Report Inquiries

    It may not be immediately apparent, but after a while your credit card companies may catch on if you are consistently using an available balance from one card to pay off another card. Most of your creditors do regular inquiries to find out what is going on with your credit. They use this information to make decisions regarding your account. So it is possible that your credit card will see a trend and notice that a portion of your balance is consistently being traded with another account. What they choose to do about it is up to the policies and discretion of the company.
  • Warning

    Many people refer to this tactic as "Robbing Peter to pay Paul." It is usually a sign of financial distress since the cardholder is unable to pay down their credit accounts using an income source. Continuing to participate in this practice over a long period of time will likely catch up to the credit card holder if the banks decide to decrease the user's credit limit or when the additional costs related to this payment behavior become too much for the credit card holder to bear.
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