Paying One Card With Another

When you’re at the limit of your credit card and have nowhere else to go, with high interest rates and a falling credit score, what are your options? Well, that all depends on how much debt you’re carrying on your current credit line, but for many consumers, a balance transfer is the logical next move. So how do you pay for one card with another, essentially?
First of all, it’s perfectly legal. Many individuals wonder if such a manoeuvre constitutes fraud, but the truth is that often times credit card companies will encourage such a transfer because it allows them to buy your debt. We’ve mentioned this somewhat before, and as previously stated the change can be appealing as a way to reduce your debt as it will offer you a lower interest rate on your new card. This new rate won’t last forever—0% APR generally gets cut off after about six months—but during that time you can do significant work towards getting rid of your debt.
Another good reason for making a transfer is that hanging on the edge of your credit limit is a good way to do some serious damage to your credit score. Ideally you’ll keep your credit balance at about 25-30 percent of your limit, so if you can make a transfer between two cards and bring both down to this level (or better yet, paying off the high interest card altogether), you’ll be significantly improving your situation. You don’t want to transfer a maxed out card to another empty card, then maxing it out. Even with your new low interest rate offer, this isn’t a good position to be in.
What you don’t want to do is get into the habit of paying off one card with another over and over again. For one, every balance transfer comes with a necessary closing cost that can sometimes be rather significant—even to the point of outweighing the potential benefits of your new, lower interest rate. Besides this, without actually using your own income to pay down the debt—essentially making the credit card companies pay each other—you’re going to end up costing yourself more money than you’re saving. You’ll be losing money at the rate of the difference between the percentages of the card’s interests. Not only this, but if the card companies catch on, they could impose fees, restrictions, or lower your credit limit, making it impossible to continue the cycle.
This is an ideal solution for someone who’s a little overwhelmed at the moment, and is simply looking to find a new lower interest rate. It isn’t a permanent solution, and in most cases, you’ll only want to do it once. It’s generally a sign of financial distress, so if you’re considering this as an option, you may want to speak with a credit repair agency to find out how it will impact your particular score.

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