Racking up credit card debt is a slippery slope. While there are a lot of conventional solutions to handling large amounts of debt, it’s important not to rule out other methods. Oftentimes, by exploring new options, you can find a better solution to your credit card debt dilemma.
You cant pay off your existing credit card balance with another credit card. However, you may be able to transfer the balance to another card with a lower interest rate.
Paying off a credit card with another credit card may seem like a convenient way to consolidate debt or take advantage of low introductory interest rates. However, this practice is typically prohibited by credit card companies In this article, we’ll explore the legality of paying a credit card bill with another card and explain why credit card issuers discourage this behavior
Why Credit Card Companies Prohibit Paying a Card With Another Card
There are a few key reasons why credit card issuers don’t allow cardholders to pay their balances with other credit cards
Risk of Default
Paying off debt with more debt can be a risky financial move, especially for borrowers who are already struggling If someone can’t afford to pay their credit card balance normally, taking out more credit to cover it may set them up for default down the road Credit card companies want to avoid defaults, so they prohibit practices that could lead borrowers into deeper debt.
Cash Advances and Balance Transfers
The main ways to pay a credit card with another card are through cash advances or balance transfers. Both options charge fees and interest that generate revenue for issuers. If cardholders could pay their bills directly with other cards, credit card companies would miss out on this income stream.
Anti-Money Laundering Efforts
Paying a credit card with another card could also be used to disguise the source of funds and “launder” dirty money. Credit card companies have strict anti-money laundering policies and prevent transactions that could potentially facilitate illegal activity.
How People Try to Pay Credit Cards With Other Cards
While credit card issuers don’t allow direct payments from one card to another, some cardholders still attempt to pay their balances by using cash advances or balance transfers.
Cash Advances
A cash advance lets you borrow against your available credit and receive cash. You can then use the cash to make a payment on your other credit card. However, cash advances carry fees and high interest rates that kick in immediately without a grace period. This is an extremely expensive way to pay off a card.
Balance Transfers
Balance transfers allow you to transfer debt from one card directly onto another. Many cards offer 0% intro APRs on transfers for 6-18 months. This can save on interest, but balance transfers incur fees and don’t erase the debt. It’s essentially shifting credit card balances around without actually paying them off.
The Potential Risks and Downsides
On the surface, paying a credit card with another card may seem like a convenient solution. But in practice, it carries major risks and downsides, such as:
- Rack up fees and interest charges, increasing your overall debt burden
- Damage your credit score through hard inquiries and higher credit utilization
- Lose track of payments if juggling multiple card balances
- Fall deeper into debt and eventually default if you can’t pay off the balances
- Face penalties from credit card companies for violating their policies
- Enable illegal activity if used intentionally to disguise sources of funds
For all of these reasons, credit card companies prohibit cardholders from paying their bills with other credit cards directly. The practice is too risky for lenders and cardholders alike.
Alternatives to Paying a Credit Card With a Card
If you’re struggling with credit card debt, there are safer ways to tackle it without resorting to balance transfers or cash advances:
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Contact your issuer to discuss hardship programs or modified repayment plans. Most lenders want to help customers avoid default.
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Prioritize paying off cards with the highest interest rates first while making minimum payments on the others. This “debt avalanche” method saves on interest expenses.
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Consolidate multiple balances to a lower-rate personal loan with a bank or credit union. This pays off the cards completely without incurring more credit card debt.
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Seek help from a nonprofit credit counseling agency which can help negotiate lower interest rates and create a manageable debt repayment plan.
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As a last resort if you truly can’t make payments, discuss your options for debt settlement or bankruptcy with a legal professional. Both negatively impact your credit but can eliminate unmanageable debt.
The Bottom Line
While using one credit card to pay off another may seem convenient or “creative”, it is prohibited by card issuers due to the risks and potential for abuse. Consolidating debt responsibly, with the issuer’s consent, is a better approach. If you are struggling financially, discuss your situation honestly with your lenders and seek professional help to get your debt under control without taking on more credit card balances. There are always ethical options available to pay off what you owe over time without resorting to questionable financial maneuvers.
There may be additional fees
Companies often charge a flat rate or a percentage fee in addition to the interest rate on cash advances. It’s important to read the fine print before deciding to use a cash advance.
What Is a Balance Transfer?
Balance transfers are a great option for individuals looking to move existing debt from one card to another that has a lower interest rate and other financial incentives. Many people will opt for a card where they can get the most perks and other financial benefits, like cash back on everyday spending and better rewards programs. A balance transfer is exactly what it sounds like: your balance on one card will be transferred to another for a fee. Before deciding to go this route, do the math.
Often, with fees and reduced interest rates, you may end up paying something similar to what you owed before. There are also several other pros and cons to be aware of.
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FAQ
Is paying a credit card with a credit card illegal?
Credit card companies don’t allow you to make minimum monthly payments, or to pay off an outstanding balance, with another credit card from a different company.
Can I pay a credit card with a credit card?
Is it legal to pay off a credit card with another credit card?
So you won’t be able to pay a credit card bill with another credit card. The only ways you might be able to use a credit card to pay your bill are through a balance transfer or cash advance, but they could come with fees that add to your debt, among other considerations.
Why can’t I pay a credit card bill with a credit card?
While it may seem like a viable option, issuers generally do not allow paying off a credit card with another one. This is due to the fact that it doesn’t actually reduce your debt. It just moves it over from one account to another, which can ultimately lead to higher fees, penalties, and interest rates.