3 Surprising Ways a Credit Card Can Help You Get Out of Debt

by Kevin on October 24, 2011

Getting into debt is so easy to do. Getting out is much more difficult. Many of us struggle with spending more than we earn, and we often turn to credit cards to finance our lifestyles. Due to this, credit cards are often tagged as a horrible financial tool. But is there a time where credit cards can help you get out of debt?

How Credit Cards Help You Get Out of Debt

The tool most commonly used to get in to debt can, if used wisely, help you get out of debt. How much a credit card can help you depends on how much debt you have, what interest rates you are paying, and what type of debt you have (mortgage, car loan, credit card, and so on). Here are three ways smart credit card use can help you get out of debt.

Credit Card Use Improves Your Credit Score

The easiest way a credit card can be beneficial to your debt elimination goals is by raising your credit score. The higher your credit score is, the lower your interest rates will be for debt. The easiest way to increase your credit score is to manage the credit lines you do have and to make your payments on time. Missing a payment or even just paying late on it, will damage your credit score and raise your interest rates.

Even if you have credit card debt, wisely using your card can be beneficial. You can request an interest rate reduction after having several months of on time payments. You could try calling in for a reduction every 6 months and reduce your rate twice every year. The smaller your interest rate, the more powerful the payments you make are. You will pay down your balance faster and get out of debt faster.

Account Summaries Identifies Spending

The main problem that leads many to being in debt is not knowing how much they are spending. If you don’t know how much you spend, you can’t spend less than you earn. If you put all of your spending onto a credit card, your online account summary will provide a breakdown of where you are spending money. This can make it easy to see where you are overspending money so you can make adjustments.

Cash Back is Extra Money

Taking a cash back rewards card is usually frowned upon if you are going to carry a balance. Any rewards you earn will be wiped out by the interest and fees you pay.

However, not all types of debt are credit card. You may simply be trying to pay off a car loan faster than the term of the loan. If you aren’t carrying credit card debt, the rewards you build up — whether cash back, miles, or hotel points — help reduce your costs. The money for those reduced costs can be used to pay down your debt.

Cash back is one of the best options if you are in this category. Reward points and miles are great, but are tied to spending money on a trip in other ways. If you earn cash back by buying groceries and gas for your car — every day spending — that money can be used for your debt as soon as you claim the reward.


Sun October 24, 2011 at 2:10 pm

There is that little issue of using credit cards not causing pain when spending versus when you spend with cash (and to some extent a debit card). There are studies that marketers like to state with merchants that consumers spend more per transaction using credit card than cash.

> The higher your credit score is, the lower your interest rates will be for debt.

The easiest to way improve your credit score is to apply for a new no annual fee credit card then cut it in half. If you can get the added credit line, then you have improved your debt to credit ratio. That will instantly boost your credit score. For example, if you currently have $10k in debt with $30k total credit, you have a 33% debt to credit ratio. If you get a new credit card with a $10k line, your ratio is now 25% because you have $10k debt with $40 total credit. You did nothing except for apply for a new score. Your score will be raised dramatically because of this.

Diane October 25, 2011 at 10:26 am

I use credit cards to my advantage. I pay them off every month, unless I’m using a No Interest offer (Best Buy – for my son’s laptop or Home Depot for home repairs). Those I pay off before the deadline for interest kicks in – and I use their money for free. I never buy anything I couldn’t pay for if I had to.

I also use my rewards card for things I would buy anyway & get cash back on college tuition, books, etc. Since I don’t carry a balance there’s no downside for me. But this only works if you have the discipline to work the plan! At this point in my life, I do.

Britt October 25, 2011 at 10:15 pm

Absolutely! In route to becoming debt free, my wife and I set out to find different credit cards that offered “cash back”. We always paid off the balance in full each month, so the benefits accrued toward paying down our debt (mostly student loan debt). One of the best methods is finding a credit card which gives you cash back on gasoline, regardless of where you buy the gas. For instance, BP offers 5% back on it’s own card. But if the BP station charges more than the station across the street, it’s not necessarily a good deal. We found a Chase card that paid 3% cash back on gas, and it really added up. In addition, some cards will give you 3%-5% cash back on your 3 top spending categories for the month. This can include such things as utilities and groceries. If you pay for these items with your credit card, then pay off the card in full, you’re looking at some significant cash back for items you’re buying anyway!

Cherleen @ yesiamcheap October 26, 2011 at 4:37 am

I love the cash back rewards I am receiving from my credit card. However, I have restricted myself to use it only on large purchases or 0% interest offers. I have learned my lesson the hard way.

gabriela obregon December 19, 2012 at 11:06 am

blah blah blah

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