Is It a Good Idea to Pay a Credit Card Bill with Another Credit Card?

If you, too are looking for an answer to this question, let me give you a simple answer to this - it is generally not possible to settle one credit card dues using another card, as financial institutions typically don't permit direct payment of a credit card balance with another credit card. However, there are a couple of ways you can indirectly do it. Continue reading to gain a deeper understanding of how it is possible to make a credit card payment with another credit card and whether it is a good idea to pay a credit card bill with another credit card.

Why can't you make a credit card bill payment with another credit card?

Credit Card providers generally do not permit using another credit card to make minimum monthly payments or settle an existing balance. This is mainly because the associated transaction fees are considerably high, leading credit card companies to disallow such actions. Moreover, this practice could raise doubts about its financial prudence, something that credit card companies aim to discourage.

The second reason behind financial institutions' prohibition of using another credit card to make credit payments is related to their reward programs. Typically, credit card transactions qualify for rewards like cashback, points, or travel miles. Allowing users to make credit payments with another credit card could potentially lead to higher rewards, which might strain credit card companies' resources as they would be obligated to distribute more rewards to their customers.

Nonetheless, two primary approaches are available to settle credit card debt without exceeding the minimum required monthly payment. They are - Balance Transfers and Cash Advances. Both Balance Transfers and Cash Advances stand as easy and convenient methods to reduce the outstanding debt on a credit card.

What Is a Balance Transfer in Credit Cards?

Balance Transfer essentially means moving your due amount from one lender to another. While not all credit cards allow you to make a balance transfer, most credit card providers offer Balance Transfer Credit Cards that let you transfer any dues from other credit cards, typically at a zero or lower APR. For instance, suppose you have a pending credit card payment that you can't settle in full by the due date. In this scenario, if you hold another credit card offering a Balance Transfer option, you can transfer the credit card balance to it.

So, the credit card that receives the transferred balance will offer you a period of either no interest or low interest. During this timeframe, you must repay the owed amount. However, if you fail to clear the dues within this allocated period, the credit card provider will impose the predetermined interest as well as late payment fees. Notably, during the balance transfer, you will be required to pay a balance transfer fee to the credit card issuer to whom the balance is transferred. Therefore, before initiating the transfer, it is advisable to calculate your overall savings and ensure that your savings outweigh the expenses associated with the balance transfer.

Suppose you have an outstanding balance of Rs 80,000 on a card with a 21% APR. If you make monthly payments of Rs 7,500, it will take a year (12 months) to completely repay the debt. The accumulated interest over this period would be roughly Rs 9,326.87. However, if you transfer this balance to a card featuring a 12-month introductory period with 0% APR, you won't accrue any interest during that year. Nevertheless, as discussed, you may have to pay the balance transfer fee depending on the terms and conditions of the credit card.

What Are the Benefits of Balance Transfer?

1. Interest-free Duration:

Typically, credit card balance transfers offer a 0% APR period ranging from 45 to 90 days. Within this duration, you can retain your debt without incurring interest charges. Nevertheless, certain credit cards might impose a minor interest or request a nominal upfront payment.

2. Convenient Availability:

The Balance Transfer Credit Card can be requested as needed, and its issuance is generally prompt. This efficiency arises from the swift approval process for Balance Transfer Cards, provided you meet the eligibility criteria. However, the processing period may differ based on your profile and the issuer's terms and conditions.

3. Debt Consolidation:

The Balance Transfer allows you to combine outstanding amounts from various credit cards onto a single credit card. This debt consolidation assists in efficiently handling repayment for multiple cards. Thus, if you carry dues across more than two credit cards, you have the option to consolidate them and settle a single debt via balance transfer.

4. Enhanced Credit Rating:

In the absence of a Balance Transfer Credit Card, unsettled dues could negatively impact your credit score. However, the Balance Transfer Credit Card empowers you to consolidate unaffordable debt, providing additional time to manage repayment. Consequently, your credit card bill remains current, preventing credit score damage.

What Are the Drawbacks of Balance Transfer?

1. Processing Fee:

When transferring your credit card balance to another card, there's typically a processing fee linked to transferring your credit card dues. This fee can vary from 1% to 5%, depending upon the terms set forth by the credit card provider.

2. Elevated APR:

Though the majority of Balance Transfer Credit Cards extend periods of interest-free credit, certain cards impose a small percentage of APR. After a period of no or low APR, these credit card providers charge a high APR, potentially rendering your outstanding dues more challenging to settle.

3. Possibly Inadequate Credit Limit:

The credit limit assigned by credit card issuers depends on various considerations, causing it to differ among cards. It is possible that your Balance Transfer Credit Card may offer a lower limit than other cards. Consequently, if your dues are substantial, there could be limitations in transferring the complete amount.

4. The Temptation for Additional Credit:

As Credit Card Balance Transfer facilitates debt transfer, your primary credit card regains available credit. Unless you have financial discipline and can curb the urge to make credit-based purchases, the renewed credit limit on your main card could tempt you to overspend. This behaviour can put you in a cycle of debt that might prove challenging to extricate yourself from.

5. Multiple Credit Inquiries:

While opting for a new Balance Transfer Credit Card, submitting applications to different credit card issuers can lead to numerous credit inquiries within a short span. This can negatively impact your credit score.

What Is Credit Cash Advance?

Another way you can make repayment of your credit card dues is by taking a Cash Advance on another card. A Credit Card Cash Advance is a facility offered on credit cards that enables cardholders to withdraw cash from the bank's ATM. You can withdraw cash up to the limit set on your card by the credit card issuer, and just like any other purchases you make from your card, you need to repay it with interest and other charges on the due date. However, a Cash Advance might not be available on all credit cards.

A Cash Advance is the costliest transaction that you make on your credit card. The interest rate on Credit Card Cash Advance is usually very high compared to the normal credit card interest rate. Furthermore, you will be charged a Cash Advance fee, which could be either a percentage of the cash advance or a flat rate. For example, your credit card issuer may charge you a fee of 3% of the Cash Advance or Rs 500, whichever is higher. Therefore, it is crucial to check the credit card terms and conditions to know how much exactly you will have to pay to avail of a Cash Advance. Typically, most credit card issuers charge 2% to 3.5% interest on a monthly basis, which is equivalent to 24% to 42% p.a.

Unlike regular loans, cash advances do not have grace periods. So, the interest starts accruing on balance as soon as the transaction gets completed. You will be charged with the interest even if you pay your balance in full and start the billing cycle with a zero balance. Similarly, you will have to pay the finance charges even if you pay the balance in full.

Hence, even if it might be possible to take a Cash Advance on another card to repay your credit card dues, it is certainly not advisable to do so.

Click here to read more about Credit Card Cash Advance

What to do if you are unable to make a credit card bill payment with another credit card?

When finances are tight, the inability to use one credit card to settle another can leave you grappling with the dilemma of meeting your minimum payment obligations. This becomes especially challenging when your credit card dues take a backseat to crucial expenses like rent, car payments, and childcare, where neglecting payment might result in adverse consequences. If you find yourself in this situation, here's what you should do:

1. Evaluate Your Circumstances:

Begin by examining your credit card accounts and your overall budget. Knowing the exact owed amounts, interest rates, and your monthly affordability can provide insight into the severity of your cash shortage and guide your decisions on bill prioritisation.

2. Speak to Your Credit Card Provider:

When you are unable to repay your credit card dues, it is always advisable to speak to your credit card provider, who may offer reduced monthly payments and temporary respite. This route might be suitable if your financial difficulties are short-term and you believe that more time or adjusted terms would enable you to gradually clear your balance.

3. Explore Alternative Avenues:

In specific scenarios when you can't avail of secured loans, personal loans might be a better borrowing option compared to credit cards, particularly if you secure a competitive interest rate and favourable terms. It's advisable to compare various lenders based on factors such as interest rates, processing fees, late payment charges, processing times, ease of application, pre-payment penalties, etc. This thorough assessment will help you make an informed decision.

To conclude:

While you can indirectly make a credit card bill payment with another credit card with options like Balance Transfer and Cash Advance, these options are not advisable. Opting for a Balance Transfer or Cash Advance using a credit card can turn out to be a costly transaction. It is not recommended to avail of these facilities unless it becomes an absolute necessity and there are no other options available. If you find yourself in urgent need of funds, it's advisable to get a Personal Loan, which is offered by many banks and various financial institutions.

However, if you have to opt for a Balance Transfer or Cash Advance facility, you should thoroughly check the terms and conditions. Ensure that you are fully aware of the interest rates and any additional charges you may incur, as well as the repayment terms. Knowing all these details in advance will help you avoid unexpected extra costs and allow you to prepare for the repayment process.

We are on Telegram! Join thousands of like-minded investors and our editors right now.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.