When it comes to paying down debt, statement credits can be a real help. The idea is really simple: you receive an actual credit from the bank, either by your bank or another bank. What happens is that your account balance will increase as well, and when the balance reaches a specific amount, it gets charged a small fee for you to use this credit for debt consolidation. It is important to keep in mind though, that if you do not pay your balance off each month, this will actually cost you money and hurt your credit score. Here are a few things to remember.
A statement account, also known as a “transaction” account, is simply an account that you have with a financial institution. Your bank uses this to report all of your transactions to your credit bureau. The account will be a debit card for each transaction, and a percentage of each transaction is taken out as a credit. This is why it is important to pay off your account each month.
So what are credit cards good for? Well, let's say you have a balance on one card, and you need to transfer the balance onto another card. You could always just call your bank and request that they transfer the balance onto another account. What if you need to pay down your credit card debt? If you take a vacation or go on a shopping spree, then you would simply transfer the balance from your regular credit card account to one that says it is a cash advance. When you get back home, you simply pay off the balance owed and it will be gone. The cash advance company has no way of tracking it, so there is no way to know if you paid it off.
When you use statement credits to pay down your debt, you are actually transferring the debt onto another account. This means that you will no longer have to deal with your old accounts. Instead, your current accounts will all have to be paid off at the same time. This process may seem confusing, but it really isn't. You will only have to make one payment each month for the debt consolidation to begin, and then once it is complete, you will have to make payments on one account. If you want, you can make an additional payment each month to keep your balance from growing.
Now, many people think that statement credits are not meant to be used to pay down your debt, but the truth is that they can be used in many different ways. One example would be to make an auto loan payment to pay off credit cards that you already owe. Another would be if you were late with utility bills or something. Using the statement credits to pay your bills will give you the added benefit of being able to put money away towards a new balance to pay off bills each month. You can use the credit card to pay bills at different stores, and you can even pay all of your monthly bills with it if you choose. The amount that you can pay with a credit card will depend on how much your bill is and how many cards you have. The more cards that are outstanding, the less money you can afford to pay each month.
Another reason that you should use this card is if you have some type of emergency and have nothing to do with your current card account. You can use the statement credits to pay off your bills while you wait for money to come in, but you should only pay off those cards that have an interest rate. After your debt is paid off, you may wish to pay off that card, but you should only use it until you are debt free, then transfer the balance to the new card.