Can You Pay Off a Credit Card With Another to Get Points?

Directly using one credit card to pay off another to accumulate rewards points is generally not a viable strategy. This restriction is a fundamental aspect of how credit card systems operate, designed to prevent certain financial practices.

Understanding the Direct Payment Limitation

Credit card issuers do not permit direct payments from one credit card to another. This policy mitigates financial risk for card companies and prevents “manufactured spending” or a cycle of debt. Credit card agreements explicitly prohibit using one credit card to satisfy another’s balance, as this could lead to an endless loop of debt. Payments are usually required to originate from traditional banking accounts, such as checking or savings accounts, or other approved methods. Allowing direct card-to-card payments could facilitate money laundering or enable consumers to indefinitely postpone debt repayment, posing significant risk to the financial system.

Balance Transfers for Debt Consolidation

While direct payments are prohibited, a balance transfer allows moving debt between credit cards. This involves applying for a new credit card, or using an existing one, to move an outstanding balance. The primary objective is debt consolidation and potential interest savings.

During a balance transfer, the new card issuer pays off the specified balance on your old card. That amount, along with any associated fees, is then added to your new credit card’s balance. Many balance transfer offers feature a promotional 0% Annual Percentage Rate (APR) for a set period. This allows the cardholder to pay down the principal balance without incurring interest charges. This can be a strategic tool for managing high-interest debt, streamlining multiple payments into a single account.

Points and Rewards Considerations with Balance Transfers

Balance transfers almost universally do not generate points, miles, or cash back. Most credit card rewards programs explicitly exclude balance transfers, cash advances, and other cash-like transactions from qualifying for rewards.

The intent of rewards programs is to incentivize spending on purchases, not to reward the movement of debt. Therefore, even if a balance transfer is made to a rewards-earning credit card, the transferred amount will not contribute to earning rewards. The primary benefit of a balance transfer remains interest savings and debt consolidation, rather than rewards accumulation.

Financial Implications of Balance Transfers

Engaging in a balance transfer carries several financial considerations. Most balance transfers incur a one-time fee, typically 3% to 5% of the transferred amount. This fee is usually added to the transferred balance. While some credit cards, often from credit unions, may offer no-fee balance transfers, these are less common.

The introductory 0% APR period usually lasts between 12 to 21 months, though some offers may extend up to 24 months. Once this promotional period expires, any remaining balance will be subject to the card’s standard variable APR. A repayment plan to clear the transferred balance before the introductory period ends is important to maximize interest savings.

Applying for a new credit card for a balance transfer can impact your credit score. A hard inquiry is typically made on your credit report, which can cause a temporary, small dip. However, if the balance transfer helps manage and reduce your overall debt, it can positively affect your credit utilization ratio. This can ultimately lead to an improvement in your credit score over time, provided the debt is diligently paid down.