If you have outstanding balances on multiple credit cards, you might be confused about the best way to tackle your debt and which card to pay off first. A helpful strategy to pay off your debts is by starting with the smallest balance first and gradually moving on to your higher balances. This method is known as the Debt Snowball Method, which can help you see results faster and give you a sense of progress. The debt snowball method is an effective way for individuals with multiple credit cards and outstanding balances. If you have some credit card accounts with small balances, which are becoming difficult to manage every month, then this method would be perfect for you. This technique is also beneficial for those who are feeling discouraged and annoyed by their debt and high maintenance payments.
To use the debt snowball method, you should focus on paying off your smallest debt first while making only the minimum payments on your other debts. Start by listing all your credit card debts in order from the smallest to the largest balance. Total up the minimum payments for all your cards to see the total amount you pay each month. Keep paying the minimum on all cards except the one with the lowest balance. If possible, add more money to that monthly payment. Paying more than the minimum will help you pay off the balance faster. For instance, if your smallest debt is $100 with a $10 minimum payment, increasing your monthly payment to $20 will pay off the balance in about 6 months instead of 10 months.
After you have paid off the balance on your lowest credit card, you can start the debt repayment snowball effect. You should apply the amount you were paying on your lowest card, let's say $20, to the next lowest balance in line. If you were previously making a minimum payment of $30 on that card, you can now increase it to $50 per month. Once that balance is paid off, you should apply the $50 you were paying per month to the next lowest balance and continue this pattern until you have paid off all your debts.
Using the "debt snowball" method, you will experience small successes of paying off a credit card more regularly throughout the process. This helps to keep your motivation levels high as you repay, even though you may pay more interest in the long run. If you are interested in learning more about this debt strategy or other ones please contact our office.