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Paying down credit card debt is a great financial goal to have, but it's also a challenging one for many consumers. If you need to manage your debt, it's possible to pay off one credit card with another via a balance transfer or a cash advance.
There are several things to consider with either option, however, and it's generally best to avoid cash advances. Here's what you should know if you're working on paying down a high-interest credit card balance.
When You Can Pay Off a Credit Card With Another
There are two ways you can use one credit card to pay off another one, including a balance transfer and a cash advance.
Balance transfers involve using a credit card, typically from another card issuer, to pay off an existing credit card balance and effectively transfer the balance from the original card to the new one.
Many credit cards offer an introductory annual percentage rate (APR) on balance transfers—typically 0%, but sometimes the rate is just lower than the standard rate—for a set period, which can range from six to 20 months, depending on the card. Other cards may send out balance transfer checks to existing cardholders, so you don't necessarily have to apply for a new card to get this benefit.
This feature makes it easy to pay down a balance and save on interest charges in the process. Once the promotional period ends, though, the remaining balance will typically be assessed interest based on the card's regular APR until it's paid in full.
If you have a card with a 0% APR balance transfer promotion, paying off your credit card balance before the promo period ends can be an excellent way to save money and achieve your goal of paying off the debt more quickly.
However, keep in mind that balance transfers typically come with a fee of 3% to 5% of the transferred balance. So if you transfer $5,000, you can expect to have between $150 and $250 added to your balance. That fee can still be worth it if the interest savings exceed the upfront charge, but it's important to run the numbers.
While you can technically use a cash advance to pay off another credit card, it's not advisable. Cash advances typically come with an upfront fee, and it's generally higher than what you'd be charged for doing a balance transfer of the same amount.
You'll also never get an introductory 0% APR on a cash advance. What's more, the interest you get charged—which often comes at a higher rate than the card's regular purchase and balance transfer APR—starts accruing immediately.
In other words, a cash advance could wind up costing you more money than if you were to keep the balance on the original card.
You Can't Pay Your Monthly Bill With Another Credit Card
Although you can request a balance transfer from one card to another, you can't make your monthly payment on one card with a different one.
Of course, you could technically request a balance transfer every month, but the fees and hassle of submitting a request every month likely wouldn't be worth it.
What to Do if You Can't Pay Your Credit Card Bill
If you're having a hard time keeping up with your minimum monthly payment, requesting a balance transfer likely won't solve your problem because you'll eventually need to make a payment on the new card.
There are, however, other potential solutions:
- Contact your card issuer. Many credit card companies offer some form of relief to borrowers who can't afford their payments. This assistance may come in the form of forbearance, a reduced interest rate or a modified payment plan. Just keep in mind that this relief may be temporary, so it's typically not a good long-term solution.
- Work with a credit counselor. If you've tried working with your credit card issuer and it hasn't helped, consider reaching out to a nonprofit credit counseling agency. A credit counselor can help you evaluate your situation and determine some next steps. In some cases, that may involve a debt management plan. For a modest upfront and ongoing fee, the agency can negotiate with your creditors to potentially reduce your monthly payment or interest rate and get you on a payment plan that helps you avoid defaulting.
- Offer to settle your debt. If your situation is dire enough that a debt management plan might not help, you may consider offering to settle for less than what you owe. Because this option can damage your credit score significantly, it's best considered only if you're already far behind on your payments.
- File bankruptcy. If you've pursued all other avenues and can't find a solution, filing bankruptcy may be the only option that's left. Due to the devastating effect it'll have on your credit and finances, however, it's important to consider bankruptcy only as a last resort. In the right circumstances, this option could help you get back on your feet.
Check Your Credit Before Applying for a New Credit Card
If you're thinking about applying for a balance transfer credit card to get an introductory 0% APR, it's important to note that these cards typically require good or excellent credit to get approved.
According to credit scoring company FICO, that typically means a credit score of 670 or above. Check your credit score to get an idea of where you stand, and if your credit history needs some work, take the time to improve your credit before you apply. Also, consider using Experian CreditMatch™ to get personalized card offers based on your credit profile.