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.
By now, you know that this will never alleviate your credit card pain. Debt elimination probably feels like an unattainable goal. Stop hoping for a miracle there is a plan that will have you debt free in no time!
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.
Let's take a closer look at a snowball. You start small and soon after rolling over and over they can build massive. Does that sound a little too familiar with your credit? Apply the credit card snowball effect in the positive way and you'll see it works.
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.
Pay as much extra as you can each month on the one with the largest interest rate.
Rinse, lather then repeat for each credit card in your wallet.
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 the sake of argument, lets say that you have two cards with different interest rates. Let us further assume that the interest rates are ten and twenty percent respectively. Choosing which one to pay will depend on the balance on each. If your 10% card is caring a large balance then your monthly interest accrual will be higher than the larger interest rate.
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.
Let's take another look of how to use the credit card snowball effect to your advantage:
Create a list of all your credit cards and their rates.
Choose the one with the highest interest accrual each month.
Put all the extra money on this cards.
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.
By now, you know that this will never alleviate your credit card pain. Debt elimination probably feels like an unattainable goal. Stop hoping for a miracle there is a plan that will have you debt free in no time!
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.
Let's take a closer look at a snowball. You start small and soon after rolling over and over they can build massive. Does that sound a little too familiar with your credit? Apply the credit card snowball effect in the positive way and you'll see it works.
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.
Pay as much extra as you can each month on the one with the largest interest rate.
Rinse, lather then repeat for each credit card in your wallet.
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 the sake of argument, lets say that you have two cards with different interest rates. Let us further assume that the interest rates are ten and twenty percent respectively. Choosing which one to pay will depend on the balance on each. If your 10% card is caring a large balance then your monthly interest accrual will be higher than the larger interest rate.
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.
Let's take another look of how to use the credit card snowball effect to your advantage:
Create a list of all your credit cards and their rates.
Choose the one with the highest interest accrual each month.
Put all the extra money on this cards.
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.
About the Author:
Philip Crafton is an expert in managing your credit, he has over four years experience in the financial industry. Check out the latest credit offers at www.Credit-In-Minutes.com. Copyright 2008 credit-in-minutes.com
0 comments
Post a Comment