People in this country are suffering under huge debt. Nearly everyone has at least one credit card and most have multiple credit cards. Moreover, in tough economic times many are only paying the minimum.
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!
There is a plan that will help you pay down then pay off all your credit cards! Think about it, you taking control of your financial future. This simple plan is like a credit card snowball effect.
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.
A wise person once said that those who refuse to learn about compound interest are doomed to pay it. No truer words were ever spoken! Therefore, lets begin to learn and turn the credit card snowball effect in your favor and put you on the right path to debt elimination.
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.
Do this over again for each succeeding credit card until you have eliminated them all.
Sounds like good advice doesn't it? On the surface, this is a great debt elimination exercise and eventually it will work. However there are times and situation where this is not the correct way to reverse the credit card snowball effect.
No two credit cards will have the exact same interest rate. Conventional wisdom says that it only makes sense to pay off highest interest rates. However, look at the example numbers below.
For example, let us say you have three credit cards with interest ranging from 5% to 20%. Now assume that one of the cards has a $5,000 balance at 10% interest, which is fifty dollars per month in interest. The highest interest rate you have, 20% is on a card with a $2,000 balance, equaling forty dollars per month in interest.
Conventional wisdom in the above case does not apply to debt elimination. The lower interest rate card in this example will actually increase your debt faster than the higher interest rate card.
To use the credit card snowball effect your plan might look more like this:
Create a list of all your credit cards and their rates.
Choose the one with the highest interest accrual each month.
Add extra payments to this card until the balance is zero.
Keep all other cards at minimum to free up cash to pay off the first card.
Repeat this process until all cards are paid off.
Sometimes a debt elimination plan means looking at things with a new perspective. This way of using the credit card snowball effect will have you free of your debt woes in no time.
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!
There is a plan that will help you pay down then pay off all your credit cards! Think about it, you taking control of your financial future. This simple plan is like a credit card snowball effect.
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.
A wise person once said that those who refuse to learn about compound interest are doomed to pay it. No truer words were ever spoken! Therefore, lets begin to learn and turn the credit card snowball effect in your favor and put you on the right path to debt elimination.
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.
Do this over again for each succeeding credit card until you have eliminated them all.
Sounds like good advice doesn't it? On the surface, this is a great debt elimination exercise and eventually it will work. However there are times and situation where this is not the correct way to reverse the credit card snowball effect.
No two credit cards will have the exact same interest rate. Conventional wisdom says that it only makes sense to pay off highest interest rates. However, look at the example numbers below.
For example, let us say you have three credit cards with interest ranging from 5% to 20%. Now assume that one of the cards has a $5,000 balance at 10% interest, which is fifty dollars per month in interest. The highest interest rate you have, 20% is on a card with a $2,000 balance, equaling forty dollars per month in interest.
Conventional wisdom in the above case does not apply to debt elimination. The lower interest rate card in this example will actually increase your debt faster than the higher interest rate card.
To use the credit card snowball effect your plan might look more like this:
Create a list of all your credit cards and their rates.
Choose the one with the highest interest accrual each month.
Add extra payments to this card until the balance is zero.
Keep all other cards at minimum to free up cash to pay off the first card.
Repeat this process until all cards are paid off.
Sometimes a debt elimination plan means looking at things with a new perspective. This way of using the credit card snowball effect will have you free of your debt woes in no time.
About the Author:
Philip Crafton is a professional at managing your credit, he has over four years 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
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