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.
You know what that is, right? Just like a snowball, you roll up in the backyard, credit cards will build up a balance seemingly in moments. As a consumer, you have two choices, get smashed by the credit card snowball effect or turn it around and make it work for you.
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.
First, look at the common practice for paying off credit card debt. This is what conventional wisdom says is the best debt elimination practice:
Gather all your credit card statements.
Rank them in order of interest rate percentage.
Add extra money each month to the card with the highest rate until it is paid off.
Repeat this process for all of your cards as you pay them off.
At first, the glance this seems like a reasonable plan for debt elimination. However, this is not always the best course of action.
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.
The above example just goes to show that higher interest is not always the enemy of your debt elimination. The credit card snowball effect will quickly take your balance to new heights. Particularly if you are only making the minimum, payment required.
A better way of attacking this situation is to turn the credit card snowball effect in your favor:
Collect all your credit card statements.
Choose the one with the highest interest accrual each month.
Begin concentrating all the extra money you can toward that credit card.
Pay the minimum on others until the card with the highest interest accrual is at zero.
Repeat this process until all cards are paid off.
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. - 15224
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.
You know what that is, right? Just like a snowball, you roll up in the backyard, credit cards will build up a balance seemingly in moments. As a consumer, you have two choices, get smashed by the credit card snowball effect or turn it around and make it work for you.
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.
First, look at the common practice for paying off credit card debt. This is what conventional wisdom says is the best debt elimination practice:
Gather all your credit card statements.
Rank them in order of interest rate percentage.
Add extra money each month to the card with the highest rate until it is paid off.
Repeat this process for all of your cards as you pay them off.
At first, the glance this seems like a reasonable plan for debt elimination. However, this is not always the best course of action.
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.
The above example just goes to show that higher interest is not always the enemy of your debt elimination. The credit card snowball effect will quickly take your balance to new heights. Particularly if you are only making the minimum, payment required.
A better way of attacking this situation is to turn the credit card snowball effect in your favor:
Collect all your credit card statements.
Choose the one with the highest interest accrual each month.
Begin concentrating all the extra money you can toward that credit card.
Pay the minimum on others until the card with the highest interest accrual is at zero.
Repeat this process until all cards are paid off.
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. - 15224
About the Author:
Philip Crafton is an expert in managing credit, he has mutilple years of experience in the finance and credit industry. Apply for 0% interest credit cards and more at www.Credit-In-Minutes.com. Copyright 2008 credit-in-minutes.com
