Can I Pay a Credit Card With a Credit Card?

While direct payment from one credit card to another is generally not permitted by credit card companies, several indirect methods allow for this action.

How One Credit Card Can Be Used to Pay Another

Credit card companies typically do not allow direct payments from one credit card to another to prevent a continuous cycle of debt. However, indirect methods exist that enable the use of one credit card’s credit line to “pay” off another card’s balance.

The primary indirect mechanisms include balance transfers, cash advances, and convenience checks. A balance transfer involves moving debt from one credit card account to a different one, often to take advantage of a lower interest rate. A cash advance allows a cardholder to obtain cash from their credit line, which can then be used to pay another bill. Convenience checks are checks linked to a credit card account, providing another way to access the credit line for payments or cash.

The Balance Transfer Process

A balance transfer involves moving an existing debt from one credit card to another, typically to a new card offering a lower interest rate. This process often begins with applying for a new credit card specifically designed for balance transfers, which commonly feature promotional annual percentage rates (APRs), sometimes as low as 0% for an introductory period.

After approval, the cardholder provides the new issuer with the account details of the old credit card, including the account number and the amount to be transferred. The new credit card issuer then directly pays off the specified balance on the old card.

The transferred amount, along with any balance transfer fees, is added to the new credit card’s balance. Balance transfer fees typically range from 3% to 5% of the transferred amount. This fee is usually added to the transferred balance, increasing the total debt on the new card.

The introductory APR period for balance transfers can range from six to 21 months or more. During this time, interest accrual on the transferred balance is significantly reduced or eliminated. It is important to note that if new purchases are made on the balance transfer card, they may accrue interest at a different, higher rate, unless the promotional APR specifically applies to purchases as well.

Cash Advances and Convenience Checks

Cash advances provide a way to access a portion of a credit card’s credit limit in cash. This can be done through various methods, such as withdrawing cash from an ATM using a credit card PIN, or by visiting a bank branch and presenting the credit card and identification.

The amount borrowed becomes part of the credit card balance, similar to a purchase, but is treated differently in terms of fees and interest accrual.

Convenience checks are blank checks provided by credit card companies that are linked to the cardholder’s credit line. These checks can be used to pay bills, obtain cash by writing a check to oneself, or even to transfer balances to the credit card account.

When a convenience check is used to get cash or pay a bill, the transaction is typically treated as a cash advance.

Key Financial Considerations

For balance transfers, the immediate cost is the balance transfer fee, which directly increases the debt owed. While promotional APRs offer a period of reduced or no interest, any remaining balance after this period will be subject to the card’s standard, often higher, APR.

Failure to pay off the transferred balance before the promotional period ends can result in significant interest charges.

Cash advances and convenience checks generally come with higher annual percentage rates (APRs) than standard purchases, and interest typically begins to accrue immediately without a grace period. A cash advance fee is also applied per transaction.

These immediate interest charges and fees make cash advances a very expensive way to borrow money.

All these methods can impact a cardholder’s credit utilization ratio, which is the amount of credit used compared to the total available credit. A high credit utilization ratio, generally considered above 30%, can negatively affect credit scores, as it suggests a higher reliance on borrowed funds.

Opening a new credit card for a balance transfer can also result in a hard inquiry on a credit report, which may temporarily lower a credit score by a few points. Repeatedly opening new accounts or consistently shifting debt can lead to a cycle of debt and further credit score damage.