Balance Transfers Are A Good First Step To Paying Off High Credit Card Balances
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Racking up credit card debt is a slippery slope. While there are a lot of conventional solutions to handling large amounts of debt, its important not to rule out other methods. Oftentimes, by exploring new options, you can find a better solution to your credit card debt dilemma.
- Balance transfers, which can be used to move debt from one card to another with a lower interest rate, can be a good option for individuals with high credit card debt.
- Cash advances are another option where consumers can take out cash against another line of credit and use that money to pay off an existing credit card.
- Neither of these strategies is a substitute for healthy financial planning and management, and they may not address overall problems with credit card debt.
What If I Have Multiple Cards
While one is sufficient, many people will ask: how many cards do I need to pay off my debt? Most people will answer one, because theyre scared of using more and getting in trouble. The truth is, if you can afford the payments that come with additional cards , then by all means use them!
If not, dont stress about it. This strategy provides you a cushion so that if something unexpected happens or you lose your job or whatever crazy thing happens, you still have a small amount leftover on another card for those times when life throws us curveballs.
Are Balance Transfer Offers A Good Way To Pay Off One Credit Card With Another
It is important to realize balance transfers are not free. Typically, a card company will charge you a flat fee or a certain percentage of the balance transferred.
Using the example above, Card B charges you 3 percent of the balance transferred, so if you transfer your full outstanding balance of $10,000, youll end up paying $300 in fees, so the total balance youll pay off over time will be $10,300.
Weighing this out against the amount of interest $10,000 would accrue at 20 percent over 18 months, it is still better to go with a balance transfer. Even if youre only able to transfer a partial amount, balance transfer offers can provide an avenue to get ahead with debt repayment, especially if youre having trouble actively paying down debt each month, or just need a bit more breathing room in your budget.
In short, its best to only use one card to pay off another if you can get a balance transfer offer. Otherwise, its better, and cheaper in the long-term to focus on other debt reduction strategies.
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Why Should You Avoid It
Paying off one card with another in this way is not a great idea. Essentially, you are just moving debt around, rather than paying it off. You may also end up worse off financially, having to cover fees, such as payment handling fees, as well as high rates of interest.
Depending on how your card provider handles transactions such as this, the amount paid out could attract your cards cash advance rate, rather than the purchase rate, which will mean interest will start stacking up pretty fast indeed.
Dmitriy Fomichenko President Sense Financial
While transferring balances to a credit card with a lower rate might help you short term, it does not solve your problem of being in debt. Start being aggressive on paying off your debt: eliminate all of the expenses that are not absolutely essential and funnel all extra cash towards paying off debt. Get out of the credit card slavery!
The borrower is servant to the lender. Proverbs 22:7
You can pay your credit card with cash by either visiting your card issuers branch location or at the issuers ATM. Most major credit card companies currently accept cash payments for credit card bills, including Chase, Capital One, Citibank, Bank of America, Wells Fargo, and U.S. Bank. Just dont be surprised if they ask you for identification to complete your payment in person.read full answer
Typically, to make a credit card payment in cash, youll need to go to a branch location to make a payment with a teller. Some card issuers will allow you to make cash payments via an ATM. Citibank actually only allows cash payments through their ATMs. Also, some card issuers have restrictions to paying in cash. Citibank, for example, has a monthly cap of $3,000 for credit card payments made in cash.
Types of Balances You Can Transfer to a Credit Card:
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What Are The Drawbacks Of Paying Off My Credit Card With Another Card
There are some common reasons why the outlined method above doesnt work:
1) Youre out of available credit most likely what happened here was you maxed out one or more cards already, and those limits are now engaged. It may be that youre missing a few hundred bucks for the transfer, but rather than use another card to cover it just leave about $100-$200 for flexibility on this card as well then make sure you dont use any more credit at all until you pay off the balance
2) You miss a payment if you miss one or even two payments during this process, your interest rates will skyrocket and stay that way, so really buckle down and do your best to keep up with payments!
3) Interest rates are too high to make it worthwhile if you cant get a decent interest rate on the card, this wont work. Youll probably be better off with a debt consolidation service for credit card debts if this is the case, or just bite the bullet and pay it all out of pocket.
4) You dont know your credit limits If you try to transfer too much money from one card and it gets declined, make sure to check your credit report so that you can find out exactly how many cards you have and their limits. You should also find out the balance on each card.
Choose An Amount To Transfer
Youll need to choose how much of your debt you want to pay off using this method. Ideally, you should aim for enough in one months payment so that after it goes through, there is still at least $100 left on the new account for additional payments or more if possible as a cushion! You can do $100 per month, or even less.
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Select A Balance Transfer Card
Use a balance transfer card calculator to see how much youll pay in fees and interest for each card youre looking at, and find out how long it will take you to pay off your balance.
You can also use a to check how much interest you will owe if you leave your balances on your existing cards. Compare this to the results for the balance transfer cards to estimate how much you would save with different options.
The right balance transfer card for you will depend on your budget and goals.
How Does It Work
Your credit card statement will likely list a number of ways to pay your monthly bill. You could set up a direct debit, so that each payment is automatically taken from your bank account. Or, you could arrange to pay your bill manually, arranging the transfer over the phone, online, or in some cases, in branch. You may also be able to pay at the Post Office, or via BPAY.
Whether you can use one credit card to pay off another directly will really depend on how each card is set up. Most card providers will try to prevent this type of transaction occurring, as its not a good long term solution for either party. With that being said, it could potentially work if you find the right transfer method, such as a BPAY payment from one card to another.
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Can You Pay Off 1 Credit Card With Another It’s Complicated
by Lyle Daly | Updated July 21, 2021 – First published on Jan. 7, 2020
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There’s no direct method, but there are a couple of indirect options.
If you have multiple , you’ve probably wondered at some point whether you could just use one to pay off the other.
Plenty of consumers ask this question because there would be obvious benefits if the answer was yes. It would be easier to manage when money’s tight, and better yet you could earn rewards on one credit card by using it to pay another card’s bill.
Unfortunately, you can’t earn rewards that way. And when you’re paying a credit card bill, there’s no way to add another credit card as a payment source. There are two potential workarounds — but only one of them is a good idea.
How To Make A Balance Transfer Work
The key to making a balance transfer work is to determine how much money youll need to devote to your credit card debt so that youll pay it off before the 0% period ends. You cant run up new debt on your old card, either. Doing this will defeat the purpose of a balance transfer and leave you with even more debt than when you started.
There are other balance transfer challenges:
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Chasing Credit Card Rewards
Credit card rewards are usually worth far less than the extra interest you’ll accrue if you can’t pay off the money you spend to earn those bonuses. You may, for example, receive one point for each dollar you spend, but you’ll probably need to redeem 5,000 points to get a $100 discount on a plane ticket. Since the interest charged on outstanding account balances often exceeds the typical 2% bonus, it may not be a worthwhile trade-off.
You should also avoid signing up for multiple credit cards, regardless of bonuses. If you already know you don’t manage credit cards well, don’t add temptation in the form of additional cards. It’s also easier to miss a payment deadline when you have more cards than you can manage. Remember, a few late fees or interest payments will quickly obliterate those sign-up gifts or rewards.
You can use your cards more frequently once you have your debt paid off and know how to avoid new debt. As long as you pay your balance in full and on time each month, there is nothing wrong with using credit cards instead of carrying cash or to take advantage of rewards like cash back or frequent flier miles. Just make sure those purchases fit within your monthly budget.
What To Do If You Are Unable To Pay Your Minimum Bill Amount
At times, you may find yourself in a tight spot with your monetary obligations. In times like these, covering up your minimum payment obligations with another credit card may be the only option available. It is always a good idea to assess your situation from time to time and find out if you are facing a problem with your payments.
While communicating an extreme situation with your lenders may be an option at times, you can always cover up most payments by transferring money from one credit card to another one. This is, in fact, an interest saving method where you can move your debt obligation from a high-interest credit card to a low-interest one.
You can expect to pay a fee on this method which may range between 3-5%, calculated on the amount which you transfer between the cards. However, you should know that there are no rewards on transferring balances, and at times, they can take a considerable time to process.
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Should You Pay Multiple Cards Or Focus On One
Once you know how much each credit card balance costs you, its time to decide which one to pay off first. As long as you meet your minimum balances on every card, it can be more efficient to focus on a single debt balance at a time during your payoff period.
First, make sure you avoid any missed payments or penalties by setting up all credit cards with a monthly auto-payment that covers at least your minimum payments. This step will protect your credit score too, as on-time payments are one of the top factors credit bureaus use to calculate your creditworthiness.
Once all your monthly auto-payments are set up, decide how much extra you can afford to budget for debt payoff. For instance, if you can afford to put $200 per month towards paying down your debt and your monthly payments across all of your cards equals $50, then you have $150 to strategically knock out one balance at a time using the debt payoff strategy that works best for you.
Heres What You Can Do If You Are Unable To Pay Your Minimum Monthly Due
When you are facing a slight financial crunch, your money is tight, and you do not have the option at hand to pay your credit card dues with the help of another card, you might be left amidst the confusion and stress of how to cover your minimum due, especially if they come along with some bad consequences of not paying other bills such as rent, child care, car payments, etc.
If you are somewhat in a similar situation, here are some things that can help you out to begin with:
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Pay On Time And Aggressively
Its essential to pay your bill on time. If you pay late, youll incur fees, which would offset some of the savings from consolidating your credit card debt. And falling behind on your payments will likely cause you to lose your introductory APR.
While you need to pay at least the minimum each month, youll make progress faster if you pay more. It may be helpful to divide the amount you want to pay off during the introductory period by the number of months to get an idea of how large your payments should be. For example, if you have an intro APR for 12 months and you owe $6,000, then paying at least $500 per month will keep you on track to eliminate your debt by the time the introductory period is up.
Keep in mind many cards have different terms for balance transfers and purchases, so check the purchase APR before shopping with your balance transfer card. You likely wont enjoy a grace period on your balance transfer card, as youll be carrying a balance each month. This means until youve paid off your entire balance and paid your bill in full for a few months to earn back your grace period, any new purchases will attract interest right away.
When Should You Do It
Using this option, again, you are simply redistributing debt, rather than paying it down while adding to your overall debt with additional fees and interest. However, it could be used as a last resort in certain circumstances.
- If you use this as a short term solution, it could allow you to pay your credit card bill, while avoiding late fees. If you know you have money coming in soon, you can then use those funds to pay off the cash advance, minimising the amount you would pay in interest on the withdrawal.
- If you have a card with a low cash advance rate, you may also find this to be a workable solution on occasion. While some cards have cash advance rates that reach 23-24% p.a., you can find cards with a much lower rate across both purchases and cash advances.
- If you are considering a payday loan to help you cover your card payment, you may find a cash advance offers a cheaper alternative. However, this will depend on your circumstances.
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For Making Direct Monthly Payments: No
Paying off your monthly credit card dues with different cards generally is not a bright option to go with. You should not even start to expect that you would earn the easy points or miles in this never-ending cycle or that you can buy yourself more time in a quicker way with this option.
The various credit card issuers in the market require you to provide them with a bank account number while you are paying off your bills, be it using online platforms or using telephonic platforms. You will be required to provide information such as an account and routing number, and you cannot just substitute this information with a credit card number.
In part, these restrictions are in place because credit card providers want to limit their degree of risk. A customer that makes use of credit cards to pay off dues on another credit card may have a higher probability of defaulting on his/her payments.