There are multiple ways to eliminate your credit card debt, but one of the easiest and most rewarding is through the snowball method.
How does it work? You set out to pay a fixed amount per month which is over and above what the minimum payments are. The excess amounts go to the smallest balance. Once that is paid off, add the excess plus the minimum payment on the smallest to the second smallest. Continue this process over and over until all your debt is GONE.
Let’s say you have four credit cards with $5000, $3000, $2000, and $1000 carrying fixed minimum payments of let’s say $100, $60, $40, and $20. Each of the cards carries a 15% interest rate.
Now we all know that paying off only the minimum amount will take forever – 78 months or six and a half years to be exact. However, in this example, we’re going to pay $400 per month starting at $100, $60, $40, and $200 respectively (note the higher payment on the smallest card). After five months the first card is paid off.
Starting with month six, keep the $400 per month payment but add $200 to the next smallest card – hence we’re paying $100, $60, $240. After eight more months the second card is paid off. Continuing this process, after month 22 the third card is paid off and the last card is paid off by month 32.
Why does this work? Well it’s really just psychological, giving the feeling of accomplishment after each card that is paid off.
However, like any other debt elimination plan, snowballing debt only works if you stop using your cards!
Nevertheless, the debt snowball method is a great way to eliminate your debt quickly with a great deal of ease and satisfaction!