What’s the best strategy for paying off (or at least significantly paying down) credit card debt on multiple cards? Where do you start? Two popular strategies are the “avalanche method” and the “snowball method.”
Let’s look at how these two winter-themed methods work and which one might be best for your particular situation.
The avalanche method is the better one if your goal (aside from paying off your cards) is to minimize the amount of interest you pay each month. With the avalanche method, you pay off the card with the highest interest rate first. If you don’t know what your interest rates are on your cards, look at the fine print on your statements.
Pay as much as you can on your highest rate card every month, while still paying the minimum that’s due on your other cards. Once that card is paid off, do the same with the next highest rate card and keep going until your cards are paid off.
The snowball method is better if you want to pay off as many cards as possible as quickly as possible. As you see the number of cards on which you owe money decrease, you can gain confidence in your ability to tackle your credit card debt.
With the snowball method, you focus first on the card with the smallest balance. Again, don’t neglect to pay the minimum due each month on all of your other cards. Once that first card is paid off, focus on the one with the next largest balance, and continue until you reach the card with the largest balance.
Whether you choose one of these methods or another one (such as a consolidation loan), you need to watch how many expenses you’re continuing to put on your credit cards. You may want to consider closing one or more of your credit card accounts.
If you’re not able to substantially pay down your credit card debt and still pay your basic living expenses, it may be time to consider other debt-relief options.
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