Economics/I wondering..


2- is credit card cash advance money considered to be part of the money supply ?

1-can i pay off my credit card with another credit card ?

The money used to offer credit card advances are part of the money supply, but the advance itself has nothing to do with money supply.  That money could have been issued out as a mortgage, as credit card debt, as a boat loan.... that money was already part of the money supply before it was ever issued as a credit card advance.  The money advanced to you was put into the reserves of the bank that forwarded you the money, and they are choosing to lend that money to someone else in order earn income in the form of interest.  Before the bank had that money, it belonged to either an organization or individual, which gave the bank money to put in a bank account.  Banks must keep a percentage of all deposits on-hand in order to pay back people withdrawing funds as well as to ensure they can pay their own debts.  That amount is set by the federal reserve, which is in charge of monetary policy, including bank reserve requirements.  By decreasing the reserve requirements, money supply increases because banks can lend to borrowers a larger percentage of deposits.  When reserve requirements increase, the banks are required to keep a larger percentage of deposits on reserve, decreasing the money supply.  So when you get a credit card advance it doesn't change the money supply, but that money is a part of total money supply.

Yes, it is possible to pay one credit card using another credit card, but the result is a transfer of the balance from one card to another - your debt doesn't go away, it just changes cards, which is a good thing if you can get a lower interest rate than what you are currently paying.  Whether doing so is a good decision for you, personally, depends entirely on your financial situation but as a general rule, I recommend staying far away from credit cards altogether.  Never fund consumer spending using debt.


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Michael Taillard


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