How to Use Credit Cards to Pay Off Your Debt

While you may think of credit cards as evil entities designed only to get you into debt, the surprising news is that when used correctly, credit cards can help get you out of debt. This is true when you apply and are approved for credit cards that have special offers, especially a 0 percent balance transfer card. Read on for specific, step-by-step tips to reducing your debt.

1. Assess Your Overall Debt and Needs

The process to paying down debt starts with taking an honest assessment of how much debt you have in total. Knowing this number helps you determine if opening a credit card could truly help you pay down your debt. Write down everything you owe on credit cards and even smaller loans, such as student loans or a car. Also write down what percentage interest rate you owe on each. For example, it would be smarter to pay down a credit card you owe £2,500 on with 20 percent interest than a car you owe £3,000 on with 5 percent interest because you will lose more money in interest on the credit card.

The next step in your assessment is to obtain your credit score. Experian, Equifax and Transunion are the three UK credit bureau companies to whom credit cards can pull your credit records from. While it can cost on the front end to pull your credit score, you will have a better assessment of how likely it is a credit card company will approve you. Each credit reporting bureau is slightly different. However, the best credit score is typically 800 points, credit card companies award the best terms to those who have credit scores in the high 600s to 700s.

You really should only proceed to step 2 if you have debt that you could reasonably pay off in about a year or when you narrow down your debt to that which you could pay off in a year. Do the math on what extra payment you could afford to make. For example, if you owe £2,400 on a credit card, this means paying off £200 each month. Expecting that you could pay off an £8,000 credit card balance (a payment of nearly £670 pounds per month) probably is not realistic. Because the new credit card balance will rise after the 12-month period, you only want to transfer what you can afford.

2. Do Your Research.

You don't have to apply for the first credit card offer that graces your doorstep or even go with the bank or card you always go for. Instead, do a little research on sites such as uswitch.com, This allows you to search for all the available credit cards offering balance transfers and the average terms of each. For example, you can evaluate the average credit limit extended and how many months the balance transfer is interest-free. Remember this information represents the best terms, not necessarily the terms you will get. However, credit card companies will give you at least six to 12 months on balance transfers provided you qualify. However, some credit cards, such as the Barclaycard Platinum with BT, is offering at 28-month interest free period while TescoBank and NatWest are offering 27 months.

3. Apply for the Best Option.

In a perfect world, you would apply for a credit card only once because each credit application can lower your credit score. This is why you must select the credit card most likely to help your financial situation. Once you select the right card for you, the application process is fairly straightforward. You will be asked for information about your occupation, annual salary and if you have ever had to file for bankruptcy. The credit card company may also ask you if you want to fill out balance transfer information as you apply for the card.

Most credit card companies will notify you if you are approved for the card and at what credit limit within 30 days. Some cards are even instant-decision where you can find out if you are approved for the card shortly after you apply. At this point, it is important you read the fine print. Some credit cards may charge a small fee for balance transfers, such as one to five percent of the balance transferred while others may not charge a fee. Many cards also require you to make a balance transfer within the first 60 days of holding the card. This means you must be prepared to make the transfer as quickly as possible so you can begin paying down your credit card debt.

4. Follow Through

Sticking to your initial plan for regular monthly payments ensures you are best able to pay down your debt at a 0 percent interest rate. In doing so, you can improve your credit scores and save on the interest you would have otherwise accumulated leaving the balance on another credit card.

Sam Jones directs readers wishing to know more about how to deal with credit card debts to http://www.uswitch.com/credit-cards/credit-card-consolidation/ - an advice page on price comparison website uSwitch.