Can I use one credit card to pay off another?

Can I pay off a credit card with another credit card?

Technically, you can pay off one credit card using another, but it can be a risky option that may cost you more in the long run.

There are two ways it’s possible to pay off a credit card with another, and both come with potential pitfalls:

1. Transferring the balance you owe to a credit card with a balance transfer offer
2. Withdrawing cash from another credit card via a cash advance and using it to pay off the balance

Cash advances aren’t typically recommended for paying off debts, as you’ll usually need to pay a cash advance fee (and interest will apply immediately until you pay the cash advance off), making it a risky and potentially costly process.

What is a credit card balance transfer?

A credit card balance transfer is when you move the balance of one credit card to another, preferably one with a lower interest rate.

You might decide to transfer a balance if you owe money on a credit card that charges a high interest rate, and wish to move your debt across to a card that charges less interest.

Some credit card providers offer cards that come with zero or low interest balance transfer offers. These typically give you a set period of time for you to pay off your balance without worrying about it growing due to interest charges. But once this time is up, the card typically reverts to a higher interest rate for any balance still owing.

You may also want to consider closing your old credit card after transferring your balance, to avoid spending more money and getting back into debt. You can do so simply by contacting the card provider.

What costs and risks are associated with balance transfer credit cards?

While a credit card balance transfer may seem like an appealing way to consolidate your credit card debt, or to pay your debt down with no or low interest charges, there are still some important costs and risks to keep in mind:

Credit card transfer fees

If you are transferring your credit card balance to another card, a fee may apply which will typically be a percentage of the amount transferred. While the percentage may vary depending on the provider, the fee can add to your existing debt.

Revert rates

While balance transfer credit cards often come with an initial low-interest or interest-free period, the card will typically revert to a higher interest rate after a certain amount of time. If you’ve not paid off your balance when this period ends, then you will need to pay interest on the amount still owing. It’s also worth knowing these lower rates (called promotional rates) typically only apply to the transferred balance, and don’t apply to any new purchases you may make.

Annual fees

While an initial low-interest or no-interest period on a balance transfer credit card can appeal, it’s important to find out what annual or ongoing fees the credit card provider charges. Depending on how high these fees are, they could effectively offset your interest savings.

Implications for your credit score

When you apply for any credit product, including a balance transfer credit card, this application will be noted on your credit score, whether successful or not. Multiple applications for credit products in a short space of time can risk lowering your credit score, as can failing to meet your monthly repayments.

What can you do if you are experiencing financial hardship?

If you’re considering whether to use one credit card to pay off another, then you may also have broader concerns around your financial position or the cost of living.

If you are experiencing financial hardship, the Australian Financial Security Authority, which is administered by the federal government, recommends speaking with a financial counsellor to discuss your options.

To speak with a financial counsellor, you can contact the National Debt Helpline on 1800 007 007. This free hotline is open from 9:30am to 4:30pm Monday to Friday. You can also find free resources on the National Debt Helpline website.

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