A reader's boyfriend thinks he found a clever loophole. He hasn't. But he still has options.
Question: My boyfriend is a great guy, but he’s not good with his money. He’s always looking for a “get rich quick” scheme, which of course ends up costing him money instead of making him money.
While I pay off my credit cards every month, he has about $12,000 he’s carrying on several cards, I don’t even know how many. He thinks he can open some more cards and use them to pay off his old cards. I told him I love him, but he’s an idiot. I can’t imagine that will work. If it was legal, everyone would be doing it already.
We’ve agreed to listen to what you say. I hope you can answer this, because I’m thinking of marrying this guy, but I can’t fight about this anymore.
— Jessica in Oregon
Howard Dvorkin CPA answers…
Your boyfriend is mostly wrong, but he’s not completely wrong.
No, you can’t simply pay off one credit card by swiping another credit card. Why? Because as you say, Jessica, the credit card companies are smart enough to forbid it.
Still, your boyfriend has options. I’d recommend only the last two, however…
Borrow from yourself
You can take out a cash advance on one credit card to pay off another. Of course, the credit card companies realize this is a possibility, so it’s no coincidence that cash advances cost more in fees and interest than you owe on your initial purchases. This isn’t something I’d ever recommend, but I mention it just in case your boyfriend stumbles upon this idea, too.
Buy some time
Another idea I’ll shoot down: Using your credit cards to buy everything, thereby taking advantage of the “grace period” to have enough money to pay another card. You could do this for a while, I suppose, but eventually, it’ll catch up to you.
Is credit card debt keeping you from success? Learn how to get your debt under control.
Some credit cards allow you to transfer the high-interest balances from other cards to theirs — and pay no interest for up to 18 months. With the average credit card interest rate hovering around 16 percent, that’s a significant savings.
Of course, these credit card companies aren’t offering this deal out of kindness. They know darn well that many folks won’t pay off those balances in 18 months. Thus, they make money in the long run — your money.
Still, if you use these cards deftly, you can save heftily. Read The ABCs of Credit Card Balance Transfers for details.
As anyone who’s read this column for even a little while knows, I’m a huge advocate of credit counseling. The reason is simple: You get a detailed debt analysis from a certified credit counselor, and it costs you nothing. Your boyfriend seems like a perfect candidate. Instead of trying to get rich quick, he can learn the next best thing: Get rich slowly. Ask him to read What Is Credit Counseling And Why Do I Need It?
Finally, Jessica, I urge you to have a frank conversation about money. As Debt.com reported last year, a lack of cash and communication are the major causes of divorce. Don’t become a statistic, Jessica.
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Published by Debt.com, LLC