Americans have on average three credit cards per household carrying a combined balance of nearly 12,000 thousand dollars and most are just paying the minimum payment due.
You are already aware that this is taking you deeper into debt and further from debt elimination. In fact, your balances are likely growing on you seemingly moment by moment. Do not give up there is 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.
Debt elimination becomes more and more difficult when you carry balances on your credit card. The credit card snowball effect in the negative is a compilation of compound interest. Therefore, the idea is to use this same effect to your advantage.
Write down all your cards.
Rank them in order of interest rate percentage.
Pay extra on the card with the highest interest percentage.
Rinse, lather then repeat for each credit card in your wallet.
There seems to be nothing wrong with the above example for debt elimination, and sometimes it is that simple. Nevertheless, situations are not all created equally and there will be times that demand a different solution.
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.
To put this in terms that make sense consider the interest on your different cards and how your balance affects that number. Say, you have a credit card with a $5,000 balance at 10% interest; this means your monthly interest is fifty dollars. On the other hand, say that the other card has a $2000 balance at 20% interest rate. Your monthly interest would be forty dollars. The higher interest rate is actually cheaper per month.
As you can see in the above example this is a time that conventional wisdom does not apply. Fifty dollars a month will soon balloon the balance on that card even though it is the lowest rate in your wallet. Especially if you are making only the minimum payment.
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.
Rank them according to amount of actual interest you pay each month.
Begin concentrating all the extra money you can toward that credit card.
Keep all other cards at minimum to free up cash to pay off the first card.
Rinse, lather and repeat for all the cards in your wallet.
Life often has many paths to the same goal. Credit cards and debt elimination are no different. Always consider things from all angles before embarking on your debt elimination process. - 16955
You are already aware that this is taking you deeper into debt and further from debt elimination. In fact, your balances are likely growing on you seemingly moment by moment. Do not give up there is 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.
Debt elimination becomes more and more difficult when you carry balances on your credit card. The credit card snowball effect in the negative is a compilation of compound interest. Therefore, the idea is to use this same effect to your advantage.
Write down all your cards.
Rank them in order of interest rate percentage.
Pay extra on the card with the highest interest percentage.
Rinse, lather then repeat for each credit card in your wallet.
There seems to be nothing wrong with the above example for debt elimination, and sometimes it is that simple. Nevertheless, situations are not all created equally and there will be times that demand a different solution.
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.
To put this in terms that make sense consider the interest on your different cards and how your balance affects that number. Say, you have a credit card with a $5,000 balance at 10% interest; this means your monthly interest is fifty dollars. On the other hand, say that the other card has a $2000 balance at 20% interest rate. Your monthly interest would be forty dollars. The higher interest rate is actually cheaper per month.
As you can see in the above example this is a time that conventional wisdom does not apply. Fifty dollars a month will soon balloon the balance on that card even though it is the lowest rate in your wallet. Especially if you are making only the minimum payment.
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.
Rank them according to amount of actual interest you pay each month.
Begin concentrating all the extra money you can toward that credit card.
Keep all other cards at minimum to free up cash to pay off the first card.
Rinse, lather and repeat for all the cards in your wallet.
Life often has many paths to the same goal. Credit cards and debt elimination are no different. Always consider things from all angles before embarking on your debt elimination process. - 16955
About the Author:
Philip Crafton is an expert in managing credit, he has mutilple years of experience in the financial industry. Apply for 0% interest credit cards and more at www.Credit-In-Minutes.com. Copyright 2008 credit-in-minutes.com
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