I want to tell you how to get rid of credit card debt without losing your sanity. We all want financial security. With thousands of dollars of credit card debt, you will definitely not have that feeling of security you are looking for. There are many different methods for getting rid of credit card debt. I will tell you which one I think works the best.
List Credit Cards in Order of Largest to Smallest Interest Rate
Many financial advisors would tell you to list your credit cards in order of interest rates they are charging you. They would advise you to pay off the credit card that has the highest interest rate first, and then move onto the next highest interest rate credit card next. This would reduce the amount of capitalized interest you pay.
This seems like a very logical and financially informed way to go about getting rid of credit card debt, but I know of a better, easier way.
SnowballingMethod
List Credit Cards in Order of Smallest to Largest Balance
The way I tell people to get rid of credit card debt is quite different. Instead of listing your credit cards in order of interest rates they are charging, simply list them in order of smallest balance to highest balance.
If you are starting off with just $100 dollars a month to put towards paying off your credit card debt, you are on your way. If your first credit card on the list has a balance of $1000 and has a minimum payment of $40, you will be able to pay that off quickly and then add the $40 per month you are now saving to the $100 dollars you already have.
Now you have $140 per month to pay off the next biggest credit card balance. When this credit card is paid off, you will gain even more money to use on paying off you credit cards each month.
Keep the Snowball Rolling Over Your Debt
As you pay off more credit cards you will have more and more money to pay on the next balance. The amount of money gets bigger as you “roll over” your credit card debt, just like a snowball rolling down a hill.
I find this approach much more encouraging and less daunting then trying to think of which card has what interest rates and trying to pay off a credit card with a huge balance that could take years, just because it has a higher interest rate. The interest rates can keep changing on you also, so you might be paying on different credit cards on different months and never get a credit card paid off.
If it takes you a few years to pay off your first credit card you can easily lose interest and stop trying altogether.
Don’t Let Credit Card Debt Get You Down
A huge factor in paying off your credit card debt successfully is your mental attitude. Do not allow credit card debt to depress you, because you will not overcome it if you do. You have to cheer up, buck up, man up, and even get angry at your credit card debt and kick it in the butt.
By using the snowballing method you will start paying off credit cards sooner, and feel excited to pay off the next one. You might find yourself selling things and spending less, just so you can free yourself from credit card bondage sooner.
