Is anyone aware of any restrictions (most likely through Visa/Mastercard) that would prohibit a credit card lender from soliciting online a payment from a cardholder by having the cardholder use another credit card.

For example, a cardholder could make his/her monthly payment by inputting the number from a different credit card.

I do not know of any, but why in the world would you want to do this???

Isn't that robbing Peter to pay Paul and just sending the customer into a bigger hole of debt? Just curious.

Have you considered any back lash (legally/law suits) concerning this option? What if the customer claims they didn't know the ramifications of using one credit card to pay another? No matter how silly that sounds, someone will claim they had no idea it was creating more debt for them....

let me know what you find out. This is interesting.

Shawndra, I agree with your line of thinking in terms of loading debt on the financially unsophisticated. But what if Robert's customer has a debit card instead of a credit card? Or what if this is how she gets her frequent flier miles? Seems like we should be able to offer our customers the convenience to pay any way they choose, while watching carefully for fraud. I'd be surprised if there is any restriction against this in the MC/VISA rules.

Actually I was surprised to see this as a topic because a few years ago, someone I knew did this exact same thing - he took advances from one credit card and used them to make the monthly payments on his other credit cards. Unfortunately, when the time came to pay the first credit card, he then took advances from the other cards to pay it.

He continued to do that right into bankruptcy.

Almost every credit card issues "checks" to their customers as a way to draw on the credit line without using the card itself. I don't see anything that would prevent someone from using those checks to make payments on another account.

It's still a very poor way to manage finances and should raise a huge red flag over the quality of that account.

Thank you for your thoughts but I disagree with both Shawndra and Bonnie. If a customer chooses to pay our credit card with another credit card, that is their choice.

Bonnie, what is the difference between using a credit card to pay online or using a convenience check to pay by mail? You post seems to assert that one method "should raise red flags about the account" but the other is acceptable. Isn't the result the same? A balance is transfered off our card and to another card.

Shawndra, how would our risk legal risk be greater than any other credit card company offering balance transfers when you talk to their telemarketer or respond to their mailing?

As Bart points out, this is a matter of maximum convenience. If someone has to make a last minute payment on their credit card or they have a cobranded card that accrues frequent flier miles, this service is a benefit.

Robert - IMHO both methods should raise red flags. There are very few people with the fiscal discipline and liquid resources to make it work properly. Most everyone else would simply bury themselves deeper and deeper in debt.

If someone is that desperate to make a last minute payment on their credit card then they either need some sound financial counseling or some organization/time management skills. As I said, I watched someone I know (who also ignored my warnings) use this method straight into bankruptcy - after he had amassed $60,000 in credit card bills.

If my customer is past due and comes to pay me with acard issued from another lender, far be it from me to refuse any legal payment.

Is it wise on the customer's part, likely not. Is it wise on my part? Well, that depends on whether I issued the card.

I know this sounds greedy and cold, but I don't want to answer as to why paymnents were refused.

Short of being told I couldn't do this, I would. Who here wants to increase their charge off amount or collection work because they refused payment.

ditto Andy

There's more to consider. This could easily be used as a form of kiting. In addition to concerns about customer foolhardiness, it's probably an area to watch for suspicious activity such as kiting and identity fraud. Balance transfers are important for competitive purposes, but there are those out there who spend their time trying to figure out how to get money from nothing!

Post Mortem on my story about the person who used credit card advances to pay other credit cards - every single credit card issuer got burned to almost the full extent of the limits they had extended.

What is even more amazing to the story is that many card issuers, when my friend got near the limit - simply increased the limit.

The point I am trying to make is this - if you have a customer who is making credit card PAYMENTS to you via another credit card, that should be a red flag to review the account, review the current credit condition (is your customer starting to max out other credit lines, etc.) and consider if the line should be frozen etc.

IMHO it's a red flag activity rather than an activity to be promoted or encouraged.

Bonnie, I agree. If you are the credit card issuer this may be a transaction that should raise a flag. I have no idea how often it happens and what percentage of those result in losses, however.

But I recall too, my days on the loan desk and the huge amount of unsecured debts that we (as an industry) allow consumers to have. Your point of raising the limit to accomodate a customer is right on target. The philosphy of "we'll make more than we lose" is going to be tested when the economy begins to shift. Bad loans are made in good times.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.