Rather than Roulette: A Better Way to Manage Your Credit Card Debt
One way that some people try to pay down their credit is by playing what is known as credit card roulette. In this game they take out a loan to pay off a credit card or transfer credit card debt from one card to another, trying to take advantage of a zero percent or lower interest rate on the transferred balance. This may sometimes work, but usually only temporarily. Unfortunately, if they continue to play this game, they will eventually have difficulty finding new offers and places to transfer the debt, or they may not read all of the fine print on an offer and end up paying more interest than they started out with, defeating the entire purpose of the balance transfer.
There is still a way to pay off credit card debt without bankruptcy, without joining a credit counseling service with high fees, and without having to get a second job.
A better technique for paying off credit card debt is known as the snowball technique. Just as a snowball gathers more snow and grows when it rolls down a hill, your payments to creditors can grow as you pay off one debt at a time and then apply that payment to another creditor.
To begin, you need to make a list of all of your creditors, including their minimum monthly payment, the total amount owed, and the APR. You will use this list to decide on which debts to pay off first and, best of all, to cross off your debts as they disappear. Of course, as with any plan, you must be prepared to make some changes.
First of all, you need to cut your overall spending down to the lowest amount possible. You may need to write out a monthly budget and stick to it. Next, you need to stop adding to your debt by making more charges on your credit cards. The sooner you decide to get serious about paying off your debt, the sooner it will disappear.
There are two ways to choose the credit card to pay off first. You can choose the one with the least amount owed because it will be the one that will disappear most quickly. The other option is to choose the card with the highest APR. That way you will be spending less money on interest each month, and that savings will add to your overall snowball.
Either way, you will pay only the minimum amount on any accounts except for the one you decide to focus on first, instead sending as much money as you possibly can each month to that account. Once you have paid that account off, you will then follow the same process for selecting the next card to focus on. Already, the snowball that you are rolling on your debt will be larger because you will have one less minimum monthly payment. You will continue this process, rolling you snowball over one debt at a time, until the debt is gone.
Using the snowball technique is not an overnight solution, but then again, there isn’t a quick fix for credit card debt. It is, however, an easy strategy to use, and it will get you out of debt and even improve your credit rating. And you can even play with this snowball all year long