Can You Pay One Credit Card Off With Another?

Individuals managing credit card debt often wonder if they can use one credit card to pay off another. While direct payment is generally not an option, a widely used financial tool called a balance transfer can achieve a similar outcome. This approach allows consumers to consolidate outstanding balances and manage debt more efficiently.

What a Balance Transfer Is

A balance transfer moves outstanding debt from one or more credit card accounts to a new credit card, typically from a different financial institution. This process consolidates multiple debts into a single payment or takes advantage of a lower interest rate.

The main objective of a balance transfer is to reduce the cost of borrowing by securing a lower Annual Percentage Rate (APR) on the transferred balance. Many offers feature an introductory period with a significantly reduced or even 0% APR. This allows more of each payment to be applied directly to the principal balance, rather than accruing interest.

Applying for a Balance Transfer

Applying for a balance transfer requires providing personal identification, such as name, address, and Social Security Number, along with income information. Applicants must also furnish details about existing credit card accounts, including account numbers and approximate outstanding amounts.

Researching and comparing balance transfer offers is important. Focus on the introductory APR period duration, which can range from six to 21 months or longer, and the standard APR that applies after the promotional period. Also note any balance transfer and annual fees associated with the new card.

Credit card issuers evaluate several factors for balance transfer applications. A strong credit score, typically 670 or higher, improves approval chances for favorable terms. Issuers also assess the applicant’s debt-to-income ratio and overall credit history to determine creditworthiness and the maximum transfer limit. It is generally not possible to transfer a balance between two credit cards from the same issuer.

Managing a Balance Transfer

After a balance transfer application is approved, the new credit card issuer sends funds directly to the old credit card company to pay off balances. This process can take a few days to several weeks. Continue making minimum payments on original accounts until the transfer is confirmed.

Once the transfer is complete, verify that old card balances have been paid off. The transferred amount and any fees will appear on the new credit card statement. Make timely payments to the new card, even with an introductory 0% APR, to avoid late fees and potential forfeiture of the promotional rate.

Consumers have options for old credit card accounts. Keeping them open with a zero balance can positively influence credit utilization and a healthy credit score. However, if concerned about new debt, closing accounts might be considered, though this could negatively impact the average age of credit accounts and overall credit limit.

Financial Aspects of Balance Transfers

Balance transfers involve financial considerations impacting debt repayment cost. A common charge is the balance transfer fee, typically 3% to 5% of the transferred amount, with some cards having a minimum fee like $5 or $10. For example, a $5,000 transfer with a 3% fee would incur a $150 charge, usually added to the new card’s balance.

Beyond the transfer fee, understanding the Annual Percentage Rate (APR) structure is important. Offers feature an introductory APR, as low as 0%, for a set period. After this promotional period, a higher, regular APR applies to any remaining unpaid balance. This standard rate varies, often from 15% to over 25%, depending on the card and creditworthiness.

Interest accrues on any balance not paid off before the promotional period expires. If a balance remains, the higher regular APR will apply, potentially leading to significant interest charges. To maximize the benefit, pay down as much principal as possible during the introductory period. Making consistent payments exceeding the minimum is advisable to save substantially on interest.

Alternative Debt Repayment Strategies

Beyond balance transfers, other methods exist for managing credit card debt. One approach is a personal loan for debt consolidation. A borrower obtains a single loan with a fixed interest rate and repayment term, using funds to pay off multiple existing debts. This consolidates several payments into one, potentially at a lower interest rate than combined credit card rates.

Another strategy is a debt management plan (DMP) offered by non-profit credit counseling agencies. Under a DMP, the agency works with creditors to potentially reduce interest rates and monthly payments. The consumer makes a single monthly payment to the agency, which then distributes funds to creditors. These plans typically aim for debt repayment within three to five years.

For self-managed repayment, the “debt snowball” and “debt avalanche” methods are popular. The debt snowball method focuses on paying off debts from the smallest balance to the largest. After the smallest debt is paid, that payment amount rolls into the next smallest debt, providing psychological momentum. Conversely, the debt avalanche method prioritizes paying off debts with the highest interest rates first, regardless of balance size, saving more money on interest over time.