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4 signs you can afford to pay off your credit card debt with your stimulus check

Millions of Americans are receiving stimulus checks as part of the government's coronavirus relief package. Should you pay off credit card debt with yours?

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Millions of Americans who qualify are starting to receive their stimulus checks this week as a part of the government's $2 trillion package in response to the coronavirus pandemic.

If you are one of the many who is experiencing some sort of financial hardship right now — whether it's from being recently laid off, having a reduction in working hours or just being worried your job is at risk — experts suggest using this windfall of cash to make sure your basic needs are met.

But for those who may still have a paycheck coming in and thus find it easier to afford the essential expenses, you may want to consider using this extra cash to pay off any high-interest credit card debt you have. 

Below, CNBC Select outlines the four signs you can afford to pay off your credit card debt with your stimulus check.

1. You can afford groceries and any other basic necessities

Many Americans are struggling right now to keep food on the table, so be sure you can afford to do so before using your stimulus money for anything else. Many major banks are helping people through financial hardship programs when it comes to your mortgage and other loans, but keeping your family fed should be the first place you look to spend any extra money.

2. Your rent or mortgage is covered

If you can afford to buy food and necessary groceries for your family, next look to keeping a roof over your head. Housing payments are defined as a 'high priority debt" by the National Consumer Law Center (NCLC) in its debt management book, "Surviving Debt" (available for free during the coronavirus emergency).

Housing may be one of your largest expenses, so if you can afford to still pay your rent right now, this is a big step and a possible sign you may be able to use your stimulus check to cover other debt.

3. You can afford to pay your high priority bills on time

Along with housing, you will want to make sure your utilities like water, sewer, electricity and gas are paid. Your utility bills, as well as any bill for an outstanding car loan or lease, are also deemed high priority by the NCLC. These expenses could have sudden and severe consequences for you and your family if not paid immediately, such as repossession of your car after multiple missed payments (which won't be helpful if you need to drive to the grocery store or to report to any essential work).

If you are able to pay these bills — and ideally on time so as not to damage your credit score — you are in a better position to use your stimulus money on paying off credit card debt.

4. You have money stored in an emergency savings fund

It may make sense to use your stimulus check to pay off your credit card debt if you already have a sizable amount of cash stored in an emergency savings fund. Experts generally advise saving three to six months' worth of expenses, and most suggest aiming for six months' worth during times of an economic recession.

While you calculate how much to put into your emergency fund, it's OK to factor only your bare-bones essential expenses in the equation. For example, your ideal budget might be $4,000 per month when you are gainfully employed and can afford to spend money on expenses such as entertainment, dining out, new clothes, hobbies and other extra products or experiences that add to your quality of life. But if you only spend $3,000 on essentials every month, a six-month emergency fund would be $18,000, and you wouldn't necessarily need to save the higher amount of $24,000 before you can start paying off debt. 

What to do if you check off these four boxes

If you do have room in the budget to pay off credit card debt, it's worth finding ways to save on interest and pay it down faster. You may want to consider a balance transfer card that gives you a promotional interest-free period so that your payments are being applied directly to your credit card balance and not towards expensive APR fees.

The Citi Simplicity® Card offers a long 0% APR for the first 21 months on balance transfers and the first 12 months on purchases (after 14.74% to 24.74% variable APR) and the U.S. Bank Visa® Platinum Card offers no interest for the first 20 billing cycles months on balance transfers and purchases (after 13.99% to 23.99% variable APR).

Most balance transfer cards require good or excellent credit (scores 670 and above) and charge a 2% to 5% fee (or a $5 minimum) for each transfer, but there are some balance transfer cards with no fee that are probably better fitted if you have a larger debt load.

Bottom line

If you receive the maximum $1,200 (and upwards of $2,400 if you're married with kids), it's in your best interest to put that money first toward essential expenses or an emergency fund, then consider any remaining amount for debt payoff. The stimulus check can help tide you over during these uncertain times but it can also help you pay off high-interest credit cards.

Keep in mind that credit card debt has the highest APR, so while it is not the most urgent need when prioritizing your budget during a recession, you'll still want to call your card issuer to come up with a temporary plan if you expect you'll be unable to make your monthly payments. Your payment history is the most important factor in your credit score calculation, so enrolling in a postponement plan (such as deferment or forbearance) is worth it if that means you wouldn't be penalized for paying late.

Information about the Citi Simplicity® Card and U.S. Bank Visa® Platinum Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.