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“Can I Use One Credit’s Card To Pay Off The Balance On Another?”

Woman holding bills in both hands and looking confusedThis is a question I saw posed recently in a forum on personal finances. Believe it or not, it is possible to have a positive balance on a credit card. The ways this would work is if you were to purchase an item, completely pay off the bill but then return it. You might then get a new credit card and wonder if you could you use the positive balance on that first credit card to pay off the balance on the second one?

You can but with some caveats

The answer to this question is fairly simple. It’s yes, you can use the positive balance from let’s call it Credit Card A to pay off the balance on Credit Card B but you cannot do it directly. In other words, Credit Card A will not send a check directly to Credit Card B. You will have to either have Credit Card A mail you a check for your positive balance or do a balance transfer – if your credit card allows this.

Why getting a check might be better

Having to get a check from Credit Card A, deposit it and then write a check to Credit Card B can be something of a hassle. But it’s usually better than doing a balance transfer. This is because transferring the balance from Credit Card A to Credit Card B might cost 2% to 3% of the amount you’re transferring. In other words if you a transfer a balance of $1,000 to Credit Card B, it could cost you as much as $30, which is a lot more than the cost of a first-class stamp to mail the check.

When a balance transfer would make sense

A balance transfer can make sense if you have a large balance on a high interest credit card (or cards) and can transfer it to a credit card with a lower interest rate. Suppose you had a credit card with an 18% or 20% interest rate and could transfer its balance to one with a 12% or even 8% interest rate. In this case, you would definitely save money. For that matter, there are now 0% interest balance transfer credit cards where the money you transfer is interest-free for anywhere from six to 18 months. You could use this interest-free introductory period to pay down or even completely pay off your debt. You should try to pay off as much of the balance on that new card as possible because when your introductory period expires, your interest rate could go back up to 18% or even 20%.

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