During a recent phone call with a client, we were discussing the ins and outs of paying off one credit card with another. This wasn’t the first time someone asked me this question and it certainly won’t be the last. Of course, it is possible to pay off one credit card with another, but it’s up to you to understand the financial implications and more importantly have a plan to pay off the debt and never accumulate credit card debt again.

Here are some reasons why you may want to consider paying off one credit card with another:

• You might think that “consolidating” debt in this manner would be a good way to manage and get out of debt.
• A new credit card may have a promotional period or “perks” – points, mileage, cash back, etc. – that might make it seem like you’re getting a reward for doing this.
• It may be that a new credit card offers a no-fee and no-interest promotional period, enabling you to avoid interest and fees on an already charged up card for a certain window of time.
• Or possibly there is a lower interest rate available on another card, reducing the interest rate long term.

Reasons to consider this financial decision

While any of these reasons could be valid enough to consider signing up for a new card and performing a balance transfer, most financial experts would caution that you need to contemplate the bigger picture and how this can affect your long term goals before making the decision to pay off a credit card this way; and here’s why.

Too much credit card debt

If you’re in debt with multiple credit cards, a viable plan of action to deliberately and wisely pay off that debt should first be crafted before any potential short-term solutions are considered. If the debt situation is serious enough, payments are being missed, no progress is being made due to only making minimum payments, and subsequent interest is piling up, before doing anything, you may want to consider contacting a non-profit credit counseling service, such as the Consumer Credit Counseling Services (find one nearby at www.nfcc.org). This organization can put another set of eyes on the situation and help you evaluate different options to move forward.

When you enlist the help of a financial professional, the process should begin with a clear assessment of your entire financial situation. This is the first step to organizing your specific situation and will allow for an easier time sorting your options to resolve this debt issue. Having a clear understanding of the facts will also help you to establish realistic timelines and goals for paying off this debt once and for all.

For some, when debt starts piling up and progress towards paying it off is slow or non-existent, discouragement and embarrassment may set in. This could potentially make you feel like all rational solutions may not be as apparent. Just remember that you can do this, every journey begins with the first step. The longer you wait to take the first step, the more it can feel like this goal is slipping further out of reach. You need to take this first step, so don’t be shy about seeking extra help and support to get you started on this journey.

Maximize points

If the possibility of gaining a large number of perks, points, or rewards is attractive, this may be a valid reason to pay off one credit card with another. Maximizing your rewards can help you save money or even take the trip of your dreams. Keep in mind that credit card promotions have different exclusions, a balance transfer may not qualify and there could otherwise be fees associated with performing the transfer. Do the math and figure out your total cost for using this promotion. Then consider how these costs weigh against the potential benefit or reward. Just remember that “free isn’t really free” when you consider all aspects.

Lower interest rate and fees

If the lure of having a new card with no fees or no interest for a period of time can give you some hope and respite from accumulating more interest, this can potentially help you make more progress toward paying off your debt. A word of caution, make sure you understand the rules, start date and end date of this promotion. Oftentimes during a promotional period the interest is accruing. If the full balance is not paid off prior to the end of the promotional period, the full amount plus accrued interest will be due.

Mark this date on the calendar and set several reminders months, weeks and days in advance! Unfortunately, I’ve seen people let this one come down to the last minute and mistakenly miss paying off the entire balance prior to the promotion ending. They suffered the consequences and I would hope never make that mistake again.

Steps toward credit card debt repayment

Once you have considered the motivation around “why” you want to pay off one credit card with another, it’s time to take action. If you haven’t already done so, now would be a great time to assess your spending and commit to a budget that you can afford. You’ll have to increase your income to pay off all this debt while continuing to support your lifestyle; or keep your spending habits in check to ensure you can make progress paying down debt, or both. If you’re ready to move forward you can start by taking the action steps below.

Cash advance

You could get a cash advance from one card to pay off another. However, there will likely be fees and additional interest added to the transaction. These additional costs should be considered in advance. Also, there may be limits as to the amount of cash advance that can be taken within certain time periods (days/months) depending on the lenders rules and your current financial situation.

Write a check

Another option may be that you could use one of the checks (sometimes enclosed with a credit card statement) provided to pay off another debt. Again, there may be limits to the amount allowed daily or monthly and extra fees and interest assessed for such a transaction. Be sure to consider the fees and interest expenses and if it still makes this a sensible decision before taking the plunge.

Use a balance transfer

If available, you could do a balance transfer. Once again, take caution and ask all the right questions about fees and timelines to avoid unintended consequences that may not be all that obvious. If it looks and sounds too good to be true, it may be too good to be true. Get the facts, know your situation, compare all your options, and then make a decision.

At the end of the day, while possibly a touchy subject, you should feel good about seeking professional help and discussing your goals for paying down credit card debt. It’s wise to consider additional research and learn more on your own in order to resolve problems related to your personal finances and debt.

The bottom line

Mastering how to manage your money is a lifetime commitment. In essence, it’s up to you to learn more and take action. While fortunately there are many financial professionals and resources to assist, ultimately it’s up to each of us to be the person most committed and taking action toward achieving our financial goals.

If you’re unsure how to move forward with your credit card debt and how that factors into your financial plan long term, speak with a financial planner today. A comprehensive financial plan should be tailored to your unique situation and focus on the human side of finance.