How to Get Rid of Credit Card Debt

Monday, September 24th, 2007 | Debt Management with

Over 75% of the United States population has credit cards or credit card debt, I am going to show you a few different techniques to paying off those credit card bills correctly.

The first thing you want to do is sit down and look at your budget (if you don’t have a budget yet, I highly suggest one or how much you can pay towards your credit cards every month). On a piece of paper write down every credit card you have with a balance on it, how much is the total balance and the interest rate for that credit card, and the mininum balance due on each card. Now we will use this information to pay off those credit cards as quickly as possible.

There are two methods that most people use and no its not just pay the mininums until they are done, they are methods that you pay the same amount to the credit cards every month until you are free of them.

Tip: Do not close every credit card you have when you pay them off! This can ruin your credit score. Keep open your oldest credit cards with the largest open credit available, do not use the card, but keep it open, you can use it once a year and pay it off the same month, so it shows a transaction, by doing this, it will raise your credit score and get you better deals in the future (such has low interest rate mortgage, ect).

Method #1 The debt snowball effect.

Put your debts in order of how much you owe to each one from lowest to highest, lets say you have 3 credit cards, one is $1200 min payments of $80, the second is $3400 min payments of $200, and the third is $2000 min payments of $160. Put them in order of $1200, $2000, and $3400. You have to pay $440 every month to these credit cards for the mininum payments, you budget $500 a month to pay to the credit cards. What you do it pay $140 to the first, and pay mininums to all the other credit cards. Anything over the mininum to your credit cards you pay to your lowest balance credit card, you keep doing this because it all goes towards the principal balance and lowers your credit card balance quickly. Once you pay off that credit card, you mark it off, BUT you still pay $500 towards your credit cards, you pay the monthly mininum to the highest cards, but the new lowest card amount you pay anything left over putting a bigger chunk towards your lower card and quickly paying it off, and once that is paid off, you keep going like this until your last card and you consistantly pay $500 a month until it is paid off. Now this is just and example, maybe you can pay more or less than this towards your credit cards, but you have to pay more than the mininum and be consistant every month.

Method #2 APR Snowball Effect

Using the same methods in Method #1, but instead of the lowest balance first, you put the highest interest rate credit card first and go in that order. Many people rather due this, because you are paying the most interest on these cards and will save more money in the long run going this way, but if you are a person that needs to see results to keep going and motivating you, you might want to do method one as you will be more inclined to keep going once you mark the cards off faster.

It is up to you, which method you choose, make sure you always pay atleast the mininum on every card you have.

Popularity: 100% [?]