Let's say you have three credit cards:
- Credit Card A - Balance $4200.00 (Interest rate 9%)
- Credit Card B - Balance $560.00 (Interest rate 18%)
- Credit Card C - Balance $1500.00 (Interest rate 4%)
While Credit Card A is the one that worries you the most, don't work to pay it off entirely first. I know you might be scratching your head right now -- but you need to use the SNOWBALL EFFECT for paying off debt. It works like this:
- Continue to pay the minimum amounts on all of your debts/credit cards. On the credit card with the smallest amount owing, pay as large a payment as you can afford each month, until the balance is at 0.
- Let's say that after 4 months of paying $140 on Credit Card B (the one with the highest interest rate AND the lowest amount owing) you've eliminated that credit card payment. Congratulations! Now...use that extra $140.00 a month on your next lowest amount owing - which is Credit Card C. (Some people choose to pay off the highest interest accounts first. This is entirely up to you. I prefer to stick with the easy way of getting rid of the smallest amounts first.)
- So, now you're paying an additional $140 per month on Credit Card C - that is, on top of the minimum monthly payment you were already paying. Continue like this until this credit card payment is also eliminated.
See how this works? :) After a while, you'll not only have a great sense of accomplishment - by ELMINATING some of your debt - but you'll also be working towards your eventual goal of ELIMINATING ALL OF YOUR DEBT!
This is an original article written by the owner of this blog. If you would like to re-publish it in whole or in part on your blog or website, please simply link back to this blog: http://frugalites.blogspot.com