It’s not uncommon to end up with a mountain of credit card debt. Perhaps you lost track of your spending and found yourself in over your head. Or perhaps an unexpected emergency expense occurred and you did not have enough money in your savings account to cover it entirely.
Many people have also increased their reliance on credit cards in recent months as a result of rampant inflation. That is unsurprising given the general increase in living costs.
In either case, if you’re saddled with credit card debt, it pays to make a concerted effort to pay it off as quickly as possible. For one thing, the longer you carry a debt, the higher the interest rate is likely to be. Additionally, high credit card debt levels can push your credit utilization ratio into unfavorable territory. Once this occurs, your credit score may suffer significantly, making it more difficult to obtain affordable credit when you need it.
Of course, the difficulty in repaying debt is obtaining the funds necessary to do so. However, if you have filed your taxes and anticipate receiving a refund, this could be a viable solution to your debt problem.
Utilize your tax refund
Your tax refund may be sufficient to cover the entirety of your debt. Alternatively, it may be able to cover only a portion of it. In either case, it makes sense to use that money toward debt repayment, especially if you’ve been struggling to pay down credit card balances.
If you’re unable to eliminate all of your debt, you’ll want to spend your limited funds wisely. Consider your various debts and determine which are the most expensive in terms of interest rates. If you owe $500 on a credit card with a 20% interest rate and $800 on another card with a 16% interest rate, it makes sense to address the $500 balance first.
Another possibility is to determine whether you qualify for a balance transfer. This way, you can consolidate all of your debts into a single card with a lower interest rate. Numerous balance transfer offers include a 0% introductory APR, which exempts you from accruing interest for a specified period of time.
Make an attempt to avoid debt.
You may be able to use your tax refund to pay off debt and start over. However, if this is the case, you’ll want to take steps to avoid debt in the future.
Establishing a budget can significantly assist you in reining in your spending and identifying cost-cutting opportunities. That is an especially prudent move if you have been struggling with inflation.
Additionally, you can consider increasing your income by pursuing a side hustle. The gig economy is brimming with opportunities these days, so even if you lack access to a vehicle or childcare, you may still be able to find a remote side job.
Credit card debt can devastate your finances and significantly harm your credit. If the IRS is about to send you a large sum of money, it could serve as your personal bailout — and help you finally pay off your debt.
The best credit card eliminates interest.
If you have credit card debt, transferring it to this top balance transfer card can qualify you for a whopping 18 months of 0% interest! That is one of the reasons our experts recommend this card as a top choice for assisting you in regaining control of your debt. During the promotional period, you’ll pay 0% interest on balance transfers and new purchases, and there will be no annual fee. For free, you can read our entire review and apply in less than two minutes.