How to Eliminate Credit Card Debt - The Snowball Effect
People in this country are suffering under huge debt. Nearly everyone has at least one credit card and most have multiple credit cards. Moreover, in tough economic times many are only paying the minimum.
As everyone knows that plan will take you, no where on the path to debt elimination. You will simply sit and spin your wheels hoping that you win the lottery so you can pay off these balances. What if there was a better way?
Using what is known as the credit card snowball effect you can pay down then pay off all of your credit cards. Currently you are floating along only doing the minimum, this way you take an active role in your debt elimination.
Snowballs start out small and unassuming by rolling them around they will grow in a hurry! Now apply this concept to paying down your balance, start with a little extra and watch it snowball until the card is clear of any balance!
Snowballing your credit card balance to achieve debt elimination is not difficult. You take a little each month and add to what you are already paying. You take the balance down faster and therefore the interest you pay, which in turn grows the amount of your next payment that goes toward principle, this is the credit card snowball effect.
First, look at the common practice for paying off credit card debt. This is what conventional wisdom says is the best debt elimination practice:
Write down all your cards.
Put them in order according to interest rate percentage.
Add extra money each month to the card with the highest rate until it is paid off.
Rinse, lather then repeat for each credit card in your wallet.
Sounds like good advice doesn't it? On the surface, this is a great debt elimination exercise and eventually it will work. However there are times and situation where this is not the correct way to reverse the credit card snowball effect.
All of your credit cards have different balances and interest rates. It would only seem to make sense to pay off the highest interest first. Nevertheless, consider these numbers.
For the sake of argument, lets say that you have two cards with different interest rates. Let us further assume that the interest rates are ten and twenty percent respectively. Choosing which one to pay will depend on the balance on each. If your 10% card is caring a large balance then your monthly interest accrual will be higher than the larger interest rate.
The above example just goes to show that higher interest is not always the enemy of your debt elimination. The credit card snowball effect will quickly take your balance to new heights. Particularly if you are only making the minimum, payment required.
A better way of attacking this situation is to turn the credit card snowball effect in your favor:
Create a list of all your credit cards and their rates.
Choose the one with the highest interest accrual each month.
Begin concentrating all the extra money you can toward that credit card.
Pay only the minimum on the rest of your cards until the first is paid in full.
Continue in this manner until all cards have a zero balance.
Sometimes a debt elimination plan means looking at things with a new perspective. This way of using the credit card snowball effect will have you free of your debt woes in no time.
As everyone knows that plan will take you, no where on the path to debt elimination. You will simply sit and spin your wheels hoping that you win the lottery so you can pay off these balances. What if there was a better way?
Using what is known as the credit card snowball effect you can pay down then pay off all of your credit cards. Currently you are floating along only doing the minimum, this way you take an active role in your debt elimination.
Snowballs start out small and unassuming by rolling them around they will grow in a hurry! Now apply this concept to paying down your balance, start with a little extra and watch it snowball until the card is clear of any balance!
Snowballing your credit card balance to achieve debt elimination is not difficult. You take a little each month and add to what you are already paying. You take the balance down faster and therefore the interest you pay, which in turn grows the amount of your next payment that goes toward principle, this is the credit card snowball effect.
First, look at the common practice for paying off credit card debt. This is what conventional wisdom says is the best debt elimination practice:
Write down all your cards.
Put them in order according to interest rate percentage.
Add extra money each month to the card with the highest rate until it is paid off.
Rinse, lather then repeat for each credit card in your wallet.
Sounds like good advice doesn't it? On the surface, this is a great debt elimination exercise and eventually it will work. However there are times and situation where this is not the correct way to reverse the credit card snowball effect.
All of your credit cards have different balances and interest rates. It would only seem to make sense to pay off the highest interest first. Nevertheless, consider these numbers.
For the sake of argument, lets say that you have two cards with different interest rates. Let us further assume that the interest rates are ten and twenty percent respectively. Choosing which one to pay will depend on the balance on each. If your 10% card is caring a large balance then your monthly interest accrual will be higher than the larger interest rate.
The above example just goes to show that higher interest is not always the enemy of your debt elimination. The credit card snowball effect will quickly take your balance to new heights. Particularly if you are only making the minimum, payment required.
A better way of attacking this situation is to turn the credit card snowball effect in your favor:
Create a list of all your credit cards and their rates.
Choose the one with the highest interest accrual each month.
Begin concentrating all the extra money you can toward that credit card.
Pay only the minimum on the rest of your cards until the first is paid in full.
Continue in this manner until all cards have a zero balance.
Sometimes a debt elimination plan means looking at things with a new perspective. This way of using the credit card snowball effect will have you free of your debt woes in no time.
About the Author:
Philip Crafton is an expert in managing credit, he has mutilple years of experience in the finance and credit industry. Apply for 0% interest credit cards and more at www.Credit-In-Minutes.com. Copyright 2008 credit-in-minutes.com
posted by Debt Consolidation Loan at
1:01 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home