Should You Use Your Stimulus Check to Pay Off Credit Card Debt?

Tarrah Gibbons
May 07, 2020 - 1:53 pm

The first wave of stimulus payments went out mid-April to help ease the financial burden for Americans affected by the coronavirus pandemic.

The checks are part of the $2.2 trillion coronavirus relief bill called the CARES Act passed by Congress.

If you receive a check, deciding how to spend it of utmost importance. While using it for rent, food and other essentials is a priority for some, others may be wondering if this is a good opportunity to pay off credit card debt.

Fox Business reported that if you are still employed and don’t have trouble paying your bills, now is the time to pay off your credit card debt.

Experts say paying off debt is a great way to improve your credit score. If taxpayers carry too much debt, it can drag down their credit score. On the flip side, paying it off can raise it.

Another perk is that using your stimulus check to pay off debt can save you money on interest. If you usually make the minimum payments on your card, upping the monthly payments will accelerate paying off your balance.

However, there are cons to using your check to pay off credit card debt. Experts warn it may not be the wisest decision if you don’t have a hefty emergency fund.

It's advised to have enough cash to cover three to six months of living expenses. So a good alternative is putting your stimulus check in a savings account in order to give you a financial cushion.

If you still want to pay off debt, you should asses all of the balances on your credit cards and pay off those with the highest interest first.

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