Are you swimming in credit card debt and searching for a way out? You are not alone, credit card debts is a huge problem for many Americans. Don’t give up, because there is a way out. What you need is a plan.
Take a look at the two most popular methods of credit card debt reduction, the Debt Snowball and Debt Avalanche methods. Both work well but are based on two different ideas. Take a look.
The Debt Snowball Method
When you make a snowball, you start out slow and gradually build it up. That is the idea behind the Debt Snowball method.
To get started, organize all of your credit card accounts by balance. You then take the card with the lowest balance and pay as much as you can on it while paying the minimum on the other accounts. Since it has the lowest balance, it will be the card that you can pay off the fastest. When you see that account with a zero balance, it will be a very satisfying moment.
Once you get the first card paid off, simply move on to the card with the next lowest balance. Repeat this process until all of your cards are paid in full.
Debt Snowball is all about motivation. If you need a quick reward of seeing an account paid off, this method may work for you. If you are more analytical though, you might want to take a look at the next method.
The Debt Avalanche Method
When you think about it, the logical thing to do would be to pay off the highest interest credit card first. By doing so, you would save yourself the most money in interest.
That is exactly what you will do with the Debt Avalanche method. Organize your cards by interest rate and then pay as much as you can on the card with the highest interest. On the others, pay the minimum balance. Keep doing this until the highest interest rate card is paid off and then move on to the next card.
This method is the most logical approach but it might not provide the same motivation as the Debt Snowball method. The highest interest card could very well be the one with the highest balance. If it is, it will take longer to pay the card off which is not very motivating.
Take Action Now
Whatever the method you choose, the important thing is that you get started right away. Living with debt is never a good thing, especially if that debt is costing you 20 percent interest every year.
Immediately stop using your credit cards and put them away. If you have online shopping accounts with saved credit card numbers, delete them. If you have memorized card numbers, call your creditor and ask for new numbers. Whatever it takes to stop accumulating debt.
Then, pick one of the methods above that makes the most sense to you and get to work. It will take time and it will take some discipline, but you can get it done.