The best credit card to pay off debt is the U.S. Bank Visa® Platinum Card because it offers an introductory APR of 0% for 20 billing cycles on balance transfers. That allows cardholders to move existing debts to the card and save money while paying them off over time. The balance transfer fee is also relatively small, at 3% (min $5).
In addition, the U.S. Bank Platinum card has an introductory APR of 0% for 20 billing cycles on purchases. It has a $0 annual fee, too. There are a few additional credit cards to consider when it comes to the best credit cards to pay off debt, though.
No matter which of the best credit cards to pay off debt that you get, you should strive to pay off your transferred balance in full before the 0% introductory APR ends. After that, any remaining balance will be subject to the card’s regular APR, which is often quite expensive.
The best way to pay off debt and raise your credit score is to repay balances with the highest interest rates first. This will reduce the overall cost of repaying the debt and make the task easier because the total amount you owe won’t be growing as fast. Always make at least the minimum payment due for each balance every month, though. Keeping all accounts current will help raise your score, or at least prevent it from going down. Beyond that, just try to budget as much as you can for paying off debt each month in order to bring your balances to zero as soon as possible.… read full answer
In addition to the overall strategy of paying off your most expensive debt first while staying current on other balances, make sure to explore options for reducing the cost of what you currently owe. If you have good credit or better, balance transfer credit cards and debt consolidation loans could help you get a lower interest rate. With a lower rate, more of your monthly payment amount can go to your principal balance, speeding up the time it takes to pay off debt.
You might also consider consolidating through a home equity loan or home equity line of credit, which offer extremely low APRs but are secured by your house. Another option is a debt management program, in which you work with your creditor(s) to set up a payment plan, often with a lower interest rate and reduced payments.
Best ways to pay off debt and raise your credit score:
Pay at least the minimum amount due on every account each month.
Spend as much as you can afford on monthly payments toward your most expensive debt – the balance with the highest APR.
Make sure to save a bit each month, to give yourself a safety net in case of unexpected expenses.
Lower your interest rates with either a debt consolidation loan or a balance transfer credit card.
Consider tapping into home equity through a home equity loan or HELOC.
Enroll in a debt management program and create a payment plan.
Paying off debt is good for your credit score because it reduces your debt-to-income ratio while establishing a good payment history – both of which are major factors in raising your credit score.
It may take at least a few billing periods before you’ll notice any significant improvement, though. A lot depends on your starting point as well as how responsibly you manage the rest of your finances moving forward.
Balance transfers do not affect your credit score directly. While balance transfers themselves aren’t reflected on credit reports, and thus aren’t directly used to calculate credit scores, balance transfers can change your financial picture in ways that could alter your credit score temporarily.
You can use WalletHub’s free credit score simulator… read full answer to forecast how a balance transfer might affect your credit score in particular. You can also learn more about how balance transfers affect credit scores in general below.
Here’s how balance transfers affect your credit score:
High credit utilization rate:
It’s best to use less than 30% of a credit card’s credit limit. However, a balance transfer can wind up consuming much more than that, which isn’t great for your credit score.
When you apply for a balance transfer card, the issuer will pull a copy of your credit report. Known as a hard inquiry, this will lower your credit score slightly, but only temporarily.
Average age of accounts:
A new balance transfer card will reduce the average age of your credit card accounts, which could knock a few points off your credit score.
Future credit score increase:
Your credit score should recover with time. Making payments on time is crucial to maximizing your credit score after a balance transfer, however, as is avoiding serious debt in the future.
To stay on top of your credit throughout every stage of a balance transfer, sign up for a free WalletHub account. You’ll get daily credit score updates, 24/7 credit monitoring, and personalized credit improvement advice.
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