The Top 3 Pros and Cons to Using a Credit Card to Pay Off Debt

Some people use their credit card balance to pay off debts. This has many pros and cons. Through Loanable financial solutions, you may avoid using credit card balance to pay off debts. But we are going to review some of the pros and cons of using the credit card. We will also review alternative methods to pay off debts. Debt management is good as it helps you clear existing loans and helps you to avoid taking more debts in future. Knowing the various options you have towards clearing loans and any other debts may help you to achieve financial freedom

Here are the top 3 pros to using a credit card to pay off debt:

  1. Improve credit rating

To qualify for loans and financial help from most lenders, your credit rating is considered. Using a credit card to shop regularly and ensuring that the credit card bill is paid on time will help you to increase your credit score.  Most organizations use the credit score to determine interest rate when you apply for a loan, rent deposit and generally your creditworthiness. Paying off debts with your credit card helps you get rid of bad debts, therefore, enhancing your creditworthiness.

  1. Avoid accrual of debt charges

If you use your credit card to pay off debts, you may avoid charges due to non-payment of the debt or late payment. With a credit card, you have up to forty-five days in some cases to repay the amount already spent. This makes it a good debt management tool.

  1. Savings

Every time you use your credit card you get rewards. Different companies have a form of reward to their loyal customers. If you pay debts using the credit card, you still get the rewards. These are forms of savings and if you use your credit card more, you also access more points and hence more rewards.

Cons of using a credit card to pay debts

  1. Destroy credit rating

Because of ease of spending, it may eventually destroy your credit rating when you fail to pay. You should use other methods to pay debts so as to avoid reducing your credit rating score. It is advisable to use alternative methods to pay debts to avoid compounding the debt problem.

  1. Interest

If not paid on time, you will be charged interest. If you are struggling to pay off debts, you may still find it hard to pay the credit card dues on time. This may end up increasing your debt in the long run.

  1. Increased debt

Since you already know you have a credit card that can help you clear monthly debt installments, you may not feel the need to look for additional sources of income. Due to ease of spending, a credit card may also get you into even more bigger debts. You should, therefore, avoid using it as much as possible. It’s best reserved for emergencies.

Before you decide to use a credit card to pay off debts, ensure that you have also reviewed other sources of finances. You may easily identify affordable loans with better repayment terms and conditions and avoid the risk of getting into more high-interest debts.