Here’s What Happens When You Use One Credit Card to Pay Off Another

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There are two ways to pay off one credit card with another. Find out what they are and what to expect with each option. 

If you’re having trouble paying your credit card bill, you may wonder if you can pay it off with another card. You can, although it’s not the standard or most readily available option. Credit card companies will only let you use a bank account as a payment method, so you can’t just plug in a card number to use for a payment.

But there are two ways you can use one credit card to pay off another. You could do so through a balance transfer, which is when you transfer a balance from one card to another. Or, you could get a cash advance from another credit card, and then use that cash to make your payment. Before you decide to try one of these, you should know what to expect from each option.

Here’s what happens if you pay off a credit card with a balance transfer

A balance transfer is the best way to pay off one credit card with another. With this method, you transfer your balance to a card with a lower interest rate, saving money on your credit card debt.

If you choose the right card, you can save a lot of money this way. The best balance transfer cards offer a 0% intro APR on balance transfers. That means during the intro period, you aren’t charged interest on the balance you transferred over. Some of these cards have intro periods lasting 15 months or longer.

To pay off a credit card like this, you first need a balance transfer card. You’ll set up the balance transfer using that card. The process varies a bit depending on the card issuer, but normally, you just go to your balance transfer card’s account and enter the info of the card you want to pay off. Here’s what happens after that:

The balance is transferred off the original credit card.The card issuer adds any applicable balance transfer fee. The standard fee amount is 3% to 5%.The full balance, and the balance transfer fee, are added to your balance transfer card.

To demonstrate how valuable a balance transfer can be, let’s say you have $5,000 in credit card debt. You pay $300 per month and your card has a 20% interest rate. It will take you 20 months to pay off, and in that time, you’ll pay $906 in interest.

Now, let’s say you transfer that balance. Your new card has a 0% intro APR for 18 months on balance transfers and a 3% balance transfer fee. You still pay the same $300 per month. The balance transfer fee costs you $150, but you’re able to pay off the full balance in 18 months with no more interest charges. You save $756 and pay off your debt two months sooner with a balance transfer.

Here’s what happens if you pay off a credit card with a cash advance

A cash advance is almost never a good move financially. This is when you get cash using a credit card. You can do so by setting up a cash advance PIN with your card issuer, and then using your card at an ATM. Some card issuers also offer cash advance checks you can use. These are paper checks tied to your credit card account.

Credit cards usually have cash advance limits that are much lower than the credit limit for regular purchases. The cash advance limit is normally between about 20% to 50% of the regular credit limit. For example, if your card has a $10,000 credit limit, the cash advance limit will likely be anywhere from $2,000 to $5,000.

Here’s what happens if you pay off a credit card with a cash advance from another card:

You’re charged a cash advance fee. The standard fee amount is 3% to 5%.Your card issuer starts charging interest immediately. Unlike with purchases, there’s no grace period before you get hit with interest charges on a cash advance.The interest rate will likely be higher than what you’d pay on purchases. Most credit cards have a cash advance APR that’s higher than the purchase APR.

A balance transfer can save you money. That’s not the case with a cash advance. After the fee and the immediate interest charges (at a potentially higher rate), cash advances get expensive very quickly. If you’re hoping to pay off one credit card with another, the only option to consider is a balance transfer.

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