Can credit cards help you reduce debt?

Can credit cards help you reduce debt?

By: The Motley Fool | December 20, 2018

By: Peter Stephens | December 20th, 2018

Using credit cards to reduce debt may sound like a rather unlikely solution. After all, credit cards exist to provide an individual with access to debt in order to make purchases. Using them naturally increases a person’s debt level until such time they are paid off.

However, for individuals who already have debt on which they are paying interest, some credit cards could be beneficial. Balance transfer cards, for example, could provide a period of 0% interest. During this time, an individual’s interest payments could be used to repay debt at a faster pace. Similarly, using a cashback card could reduce an individual’s total spending and provide them with greater scope to pay down their debt.

Balance transfer credit cards

The idea behind a balance transfer card is that it enables an individual to pay no interest on existing debt for a limited time period. This can range from a few months to a few years, and can lead to significant interest savings that can be used to repay existing debt.

For example, an individual with a £3,000 debt on a credit card with an APR of 18.9% would take two years to repay the loan, assuming they repay £150 per month. During that time, they would pay interest charges of £570 on the debt. If they were to transfer the debt to a balance transfer card which had a 0% interest period for the two-year duration, they could use the £570 to pay off their debt over a shorter time period.

While some balance transfer cards charge a fee for transferring existing balances, this is often significantly lower than the current interest rate being paid on the debt. As such, they could be a worthwhile option for consumers with existing credit card debt.


Some credit cards offer cashback when they are used to buy a variety of goods and services.With some cards, this is applicable to all amounts spent, while for others the amount varies depending on the retailer or the type of product. Either way,cashback can quickly add up, and may help to reduce an individual’s total spending per year without any additional effort on the consumer’s part. Rewards cards could also be of interest, with them helping to reduce an individual’s spending on a variety of items. Those savings could then be put towards repaying existing debt.

Some cashback cards charge an annual fee, so it is worth calculating whether the total amount spent on the card per year would easily surpass this. And since cashback cards can have relatively high interest rates, it may be prudent to ensure that they are paid off in full each month. 


Clearly, credit cards are designed to increase an individual’s debt. However, for consumers who already have credit card debt and are paying interest on it, balance transfer cards could be a means of reducing interest payments and repaying debt at a faster pace. Likewise, cashback and rewards cards could reduce an individual’s outgoings, with increased debt repayments being the end result. As a result, both types of cards could be worthy of consideration depending on an individual’s personal circumstances.

Click here to check out our top picks for balance-transfer credit cards

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