Many Americans saw their incomes suffer during the pandemic. But despite this, consumers have managed to get rid of their credit card debt and other loan balances.

Between March 2016 and March 2020, Americans’ collective credit card and loan balances increased by 29%. But now those balances are 13% below that pre-pandemic high, according to data from the Federal Reserve Bank of St. Louis. And a big reason for this could boil down to stimulus checks.

A lifeline to get out of debt

The latest coronavirus relief bill includes a series of direct payments worth up to $ 1,400 each. This money could go a long way in helping Americans pay off their debt.

So, should you spend your stimulus to get out of debt? It depends.

If you need your stimulus money to pay incoming bills or cover short-term essentials like groceries, you need to focus on your immediate needs and so worry about the debt. Likewise, if you haven’t saved any money at all, your first move should be to put your leftover stimulus money in a savings account. The reason? If you don’t have any savings, your next unforeseen expense could put you in more debt. You may not be able to borrow again or borrow as affordably as in the past. So having money in the bank should generally take priority over paying off an existing loan or credit card balance.

That said, if you have savings and your short-term needs are covered by your paychecks, then you have a real opportunity to use your stimulus to get out of debt. But you’ll want to go about it strategically. Here are some ideas on how to do just that.

1. Determine what your costliest debt looks like

If you have multiple credit card balances, find out which one charges the most interest and pay that one first. Then plan to work from there to tackle the higher interest rate balances before the lower interest rate balances – unless, of course, you can consolidate that debt.

2. See if you can consolidate your debt

Rather than juggling many credit card balances, it can be easier and more profitable to consolidate everything. If you qualify for a balance transfer, for example, you can transfer your various credit card balances to a single card with a lower interest rate. This will make all of your debts cheaper to pay off. You can also consolidate your debt by taking out a personal loan and using it to pay off your balances. This way you will only have one payment to track.

3. Decide whether to pay off healthier debt

You can’t owe money on a credit card or personal loan. On the contrary, maybe your only debt is in the form of a car loan or mortgage. While you could paying off those debts earlier than planned with your stimulus money may not be the best choice for those funds. Both of these types of loans are considered healthy debt which will not hurt your credit score unless you miss payments. Additionally, auto loans and mortgages (especially mortgages) are designed to be repaid over many years. So even if you have some savings, you might want to hold onto those debts and put your stimulus in the bank – in case you need more for an emergency fund than you initially expected.

It’s not every day that an additional $ 1,400 comes your way. If you’ve received a stimulus check but are in debt, you have a real opportunity to get rid of – or at least dramatically reduce the amount you owe. And while you may be tempted to spend your stimulus elsewhere, this is an opportunity you should definitely take advantage of.