Top Ten Tips - Snowballing Your Credit Card Debt
By Tip Diva | Apr 07, 2008
Categories: Adult, Budget, Celebration, Difficulty, Goals, Money, Organization, Savings, Tips
Credit-card debt is an unfortunate reality for many people, and in these uncertain economic times, paying off your cards can seem even more harrowing. Tip Diva is not an exception, but she has been using a method called “snowballing,” which a few people have told her about, to pay down her debts. Now, they’re going down faster than she’s imagined. Here’s how:
- Stop Using Your Credit Cards - The snowballing method works better if you don’t use the credit cards you’re trying to pay down. Cut them up, stash them in a drawer, use them as coasters - whatever it takes to stop you from swiping them.
- Determine Your Debts, Interest Rates And Monthly Payments - Check your statements to find out your outstanding debt, interest rate and the minimum payment for each card. List them from highest interest to lowest interest.
- See If You Can Get Your Interest Rates Lowered - Trying to get your rates lowered will help you pay down your debt faster. Call your credit card company and ask if they’ll lower your interest rates. But you better be a good customer who continuously pays monthly minimums on time - if not, they probably wouldn’t lower your rates.
- Determine Your Budget For Debts - Take your salary, and subtract your rent or mortgage, living costs like gas and food, savings and any other non-credit card payment. Use this total and apply it to your credit card payments.
- Pay The Minimum On Every Debt Except The Highest-Interest - Pay off all of the minimum debts on every card you have, except for the one with the highest interest rates.
- Use Rest Of Money To Pay Highest-Interest Card - Once you’ve paid the minimums, use the rest of the money to pay for the highest-interest card.
- Repeat Monthly Until Highest-Interest Card Is Paid Off - Make sure most of your credit card payment budget goes to the highest-rate card. When you’re finished paying off that card…
- Add What You Were Paying To Next Card - If you were paying $300 a month to pay down your highest-interest card, add it to the $50 minimum you were paying on the second-highest. Continue to pay $350 per month until that card is paid off.
- Continue Pattern After Next Debt Is Paid Off - As you pay off cards and add what you were previously paying to the next card, you’ll see your payment amounts “snowballing” to a higher number and quickly getting rid of your debts.
- Celebrate - Once you’re done paying off all your debts, celebrate - but perhaps leave the Mastercard at home or have a friend pay for your drink!
Other Tips To Check Out:
You might add to the list finding a way to earn some extra money, all of which you put toward your debt. Even a few hundred dollars a month can go a long way to paying down debt faster.
DR’s Money Management’s Last Blog Post: Cash Back Credit Cards | Rebates that Put Money in Your Pocket
I don’t usually post on blogs but I found yours interesting. Keep up the good work. I’ve enjoyed reading here.
There’s a lot to learn from this.
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