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!
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.
Credit cards grow so fast due to something called compound interest. To put it simply when you only make the minimum payment you likely are not even covering the interest. Now that interest ends up as part of the balance and next month, you will be assessed interest on the new balance. Sound like a credit card snowball?
Debt elimination becomes more and more difficult when you carry balances on your credit card. The credit card snowball effect in the negative is a compilation of compound interest. Therefore, the idea is to use this same effect to your advantage.
Gather all your credit card statements.
Put them in order according to interest rate percentage.
Pay as much extra as you can each month on the one with the largest interest rate.
Repeat this process for all of your cards as you pay them off.
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.
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.
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.
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.
Continue in this manner until all cards have a zero balance.
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.
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!
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.
Credit cards grow so fast due to something called compound interest. To put it simply when you only make the minimum payment you likely are not even covering the interest. Now that interest ends up as part of the balance and next month, you will be assessed interest on the new balance. Sound like a credit card snowball?
Debt elimination becomes more and more difficult when you carry balances on your credit card. The credit card snowball effect in the negative is a compilation of compound interest. Therefore, the idea is to use this same effect to your advantage.
Gather all your credit card statements.
Put them in order according to interest rate percentage.
Pay as much extra as you can each month on the one with the largest interest rate.
Repeat this process for all of your cards as you pay them off.
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.
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.
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.
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.
Continue in this manner until all cards have a zero balance.
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 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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