Credit card debt is one of the most common forms of debt, impacting 126.2 million households in the United States. Rarely do consumers open a credit card with the idea of getting into overwhelming debt, but overspending and financial emergencies happen. If you’re facing compounding credit card debt, you’ve likely sought out many ways to get ahead of it. One option that consumers don’t know much about is paying off a credit card with a credit card.
While it may seem counterproductive, using a credit card to pay off other high-interest credit card debt does work. This method requires a strict payment schedule but allows you to pay off debt with a much lower interest rate. In fact, some lenders off a no 0% APR credit card for qualified borrowers.
Here’s what you need to know about paying off a credit card with a credit card.
When to Use This Option
There’s no wrong or right way to pay off credit card debt. The best method depends on the amount of debt that you face, existing interest rates, and your financial situation. Before applying for a new credit card to pay off credit card debt, there are many factors to consider.
First look at you existing interest payment. Most people with credit card debt are paying an interest rate that’s in the double digits. Depending on your credit score and history, you may be able to get approved for a credit card with a much lower rate. The lower the interest rate, the more money that goes towards the card’s principal balance.
Another factor to consider is your budget. Without leaving yourself strapped for cash, determine how much money you can reasonably put towards a monthly credit card payment. This will help you to determine how large of a credit amount you want to ask for.
Last, be sure to look at your borrowing habits and past credit applications before applying for a new credit card. If you’ve applied for a credit card or loan in the last six months, you may want to consider another option or wait to apply. Applying for credit cards too close together can have a huge impact on your credit score. A lowered credit score will ultimately affect the interest rate and credit amount that you’re approved for.
If you believe that using a credit card to pay off existing credit card debt is the best option for you, it helps to know the various benefits that make this option even more appealing. For consumers with a solid credit score and credit history, one of the biggest benefits of using a credit card to pay off credit card debt is a low or no-interest rate credit card. This will save you hundreds of dollars each year.
Another benefit of using a credit card to pay down debt is the ability to consolidate. There’s nothing worse than having to pay different credit card companies each month. By consolidating all of your credit card debt onto one card, you only have to worry about one payment. You don’t have to worry about different payment due dates and minimum amounts.
By choosing to use a credit card to pay off debt, you can not only benefit from reducing your debt load, but you’ll also benefit from lower interest rates and consolidation.
Tips to Follow
As stated earlier, using a credit card to pay off credit card debt is a great option, but it requires serious planning. Before applying for a credit card, take the time to budget to ensure that you can afford potentially larger monthly payment. You don’t want to open a new card only to put yourself in a financial bind.
Other must-follow tips when using the credit card option include:
- Finding a low or no-interest credit card
- Comparing cards and lenders
- Choosing a card with a beneficial rewards program
- Paying off the card as soon as possible
With these tips, you can get the most out of using a credit card to greatly reduce your credit card debt. By maintaining a strict payment schedule and paying the card off before the promotional trial ends, you can move yourself one step closer towards financial freedom.
As someone with credit card debt, you may be wary about using another credit card to pay off the same type of debt. However, credit cards can be a great addition to your plan to become debt-free if used properly. With these tips, you can consolidate your debt and pay a lot less towards interest each month.
What advice do you have for people trying to pay down credit card debt? Share a comment with your experience in the section below.