It might sound crazy, but you can actually pay off debt using credit cards. Let me clarify, though: I don’t mean to pay your debt with credit cards. I mean that you can knock out the credit card debt you already have by being smart about transferring balances and choosing the best new cards for your lifestyle.
Here are some tips:
Pay Off Debt Using Credit Cards
- Look for 0% on transfers for as long as possible! You will usually find offers from 6 months to 18 months with 0% interest, which gives you some breathing room to pay off some of your debt. However, you’ll really need to use this time wisely and get ready for interest rates to kick back in after the allotted time.
- If you do not have a healthy credit situation, make sure prioritize low costs and rates over rewards. Although it can be tempting to look for the credit cards with frequent flyer miles or shopping rewards, your priority should be on the low costs provided by the card that will help your budget to stretch the furthest. Look for language like, “no late fees – ever,” and “no annual fee – ever.” There are a number of useful comparison sites that have webpages that list cards like this so just do your research!
- It is often helpful to have one credit card for everyday expenses that you pay off in full every month. A second credit card can be used, if necessary, as revolving debt enabling you to get the best possible rewards and lowest rates. This will help you budget better as any finance charges on your everyday credit card will indicate that you need to cut back. When opening a new account, ask the credit card provider to lower the limit of the credit card as this will provide a barrier as well as the knowledge that if you go over the limit you will incur large charges.
- Read the fine print and introductory offers carefully as what may seem attractive and the answer to all your problems can have some ugly charges further down the line. Again, you need to fully understand that introductory rates are only for certain period of time, and these credit cards will typically rise to their ‘normal rate’ (or even higher) after the introductory rate has expired
- Staying loyal to your first credit card can have some advantages. For example, a significant amount of your credit score is measured on the length you have had a card for. Therefore, you may still want to keep you card around, even if you choose to transfer the balance over to another card.
- Cash back rewards may be the best kind of rewards for your situation. Some credit card companies, like Capital One, offers 2% cash back on travel and 1% on everything else. If you are living on a budget and trying to pay off debt, this is the kind of reward you may want to consider.
I can say from personal experience that these methods definitely work. When I was becoming credit card debt free, I frequently moved balances around to take advantage of 0% offers. This definitely helped me pay my debt down faster, since my money was going towards my debt and not towards interest!!
Did you use credit cards to help pay down your debt?