If you’re trying to pay off debt, you are not alone. Along with student loans, one of the biggest sources of consumer debt is credit cards. According to the Consumer Financial Protection Bureau, credit card debt is on the rise again – up 9 percent since 2015. Ironically, credit cards are also one of the best tools out there for paying off debt. Many cards were specifically designed for people trying to do just that.
Here are a few tips on how to use your credit card to pay off your debt faster and save money.
Come up with a strategy
The first thing anyone tackling debt should do is face it. Stop burying those bills and statements and hoping they go away. Make a list of everything you owe¬¬: from car, utility, and medical bills, to every last credit card balance. When you get to the credit cards, make note of the APR (annual percentage rate). Those APRs are the key to efficiently paying down your debt.
Set up a payment schedule
No amount of interest is going to offset those $35 late fees you accrue when you miss a payment deadline. Start by stopping the bleed-out by setting up a monthly routine. If you can, set up auto-payments. Whenever possible, do that with a cash-back card so you can actually offset the interest you’re paying by earning some back.
Eliminate high-interest debt first
If you’re paying a high APR on certain balances, target those first. Whittle down the cost of the debt by minimizing the interest you’re having to pay every month. If you can’t scrape together the funds to do that, transfer the balance to a card that offers an interest-free balance transfer, then pay it off diligently during the 0 percent APR promotional period.
Transfer balances on high-APR cards to a card with no balance transfer fee and a decent interest-free introductory period, preferably one that offers cash back toward the balance. The Citi® Double Cash Card, for example, this card offers 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 15.74% – 25.74% based on your creditworthiness, then rewards you 1 percent cash back on any new purchases and another 1 percent when you pay those purchases off.
If you have average credit (630 minimum score) and need a couple years to pay off your debt, one strategy would be to transfer your balance to the Chase Slate, a card that charges no balance transfer fee for the first 60 days, 5 percent or $5 after that, then gives you 15 billing cycles before the APR kicks in. If you still have debt to pay off, you can transfer the remaining balance to another low-fee card with a longer interest-free period.
Use the tools your credit card provides
Some credit cards, including the Discover it® Balance Transfer, provide monthly access to your FICO score. Others offer apps you can use to help you stay on track. Both Citi and Bank of America let you set up due date alerts for payments on certain credit cards. If automatic payments aren’t an option for you, an alert from your phone is a good way to make sure you don’t miss a payment altogether.