How To Pay Off Credit Card Debt With Stimulus Check

Millions of Americans are eligible to begin receiving stimulus checks this week as part of the government’s $2 trillion package to respond to the coronavirus pandemic.

If you’re one of the many people facing some kind of financial hardship right now – whether it’s due to a recent layoff, reduced hours, or just worry your job is at risk – experts Experts recommend using this ample cash to ensure your basic needs are met.

But for those who may still have a paycheck and therefore find it easier to cover essential expenses, you might consider using this extra cash to pay off any credit card debt. what high interest rate you have.

Below, Select outlines four signs you can afford to pay off your credit card debt with stimulus checks.

Many Americans are currently struggling to keep food on the table, so make sure you can afford to do so before using your stimulus money for anything else. Many big banks are helping people through financial hardship programs when it comes to your mortgage and other loans, but keeping your family fed should be the first place you consider spending. any extra amount.

If you can afford to buy food and essential groceries for your family, next consider keeping a roof over your head. Housing payments are defined by the National Consumer Law Center (NCLC) as “high-priority debt” in its debt management book, “Debt outstanding” (provided free of charge) fees in the event of a coronavirus emergency).

Housing can be one of your biggest expenses, so if you can still afford to pay your rent right now, this is a big step forward and a possible sign you can use its stimulus checks to cover other debts.

Along with housing, you’ll want to make sure your utilities like water, sewer, electricity, and gas are paid for. Your utility bills, as well as any outstanding car loan or rental bills, are also considered high priority by the NCLC. These expenses can have serious and sudden consequences for you and your family if not paid immediately, such as recovering your vehicle after multiple missed payments (which won’t help if you need to drive to the grocery store or report to any job mechanic).

If you can pay these bills — and ideally on time so you don’t ruin your credit score — then you’ll be better off using your stimulus money to pay off your credit card debt.

You can use a stimulus check to pay off your credit card debt if you already have a sizable amount of cash stashed in your emergency savings fund. Experts generally recommend three to six months of cost savings, and most suggest aiming for six months’ worth during an economic downturn.

While you work out how much to put into your emergency fund, you only need to factor your almost unfounded essential expenses into the equation. For example, your ideal budget might be $4,000 per month when you are productive and can afford expenses such as entertainment, dining out, new clothes, hobbies and interests. other complementary products or experiences that increase your quality of life. But if you only spend $3,000 on essentials each month, your six-month emergency fund will be $18,000 and you won’t necessarily have to save more than $24,000 before you can start paying. in debt.

if you do If you have enough budget to pay off your credit card debt, you should find ways to save on interest and pay it down faster. You may want to consider a balance transfer card that offers you a promotional interest-free period so your payments are applied directly to your credit card balance and without expensive APR fees.

The Citi Simplicity® card offers a 21-month long 0% introductory APR on balance transfers from the date of the first transfer (after that, the APR varies from 16.24% to 26.24%; balance transfers). must be completed within four months of account opening) and US Bank Visa® Platinum Card interest-free for the first 20 billing cycles on balance transfers (after, 15.99% – 25, 99% APR varies).

Most balance transfer cards claim good or excellent credit (score 670 or higher) and charge 2% to 5% (or $5 minimum) per transfer, but there are some transfer cards A no-fee balance is probably more appropriate if you have a larger amount of debt.

If you get a maximum of $1,200 (and a maximum of $2,400 if you’re married and have children), it’s in your best interest to put that amount first on essential expenses. or emergency fund, then consider any remaining funds to pay off the debt. A stimulus check can get you through these uncertain times, but it can also help you pay off high-interest credit cards.

Remember that credit card debt has the highest APRs, so while it’s not the most urgent need when prioritizing your budget during a recession, you’ll still want to call the card issuer to find out. come up with an interim plan if you expect. I won’t be able to make your monthly payments. Your payment history is the single most important factor in calculating your credit score, so enrolling in a deferral plan (such as a deferral or waiver) is worth it if that means You will not be penalized for late payments.