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10 Steps to Paying Off Credit Card Debt

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Pay Off the Lowest Balance Credit Card Debts First (aka the Snowball Technique)
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The snowball technique can help you attack your credit card debt and repay your high interest balances far faster than you could by just using a random payment arrangement.

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The goal of taking control of your financial life is to increase your cash flow each month. The more excess cash you have, the more you have to reduce debts or spend on improving your lifestyle. Each debt has a minimum monthly payment. By paying off the lowest balance credit card account first, you remove an entire fixed payment, instantly making your existing money stretch further.

You then take the money you were paying on the lowest credit card debt balance and send it in to the next lowest. You repeat this process until you are left with your single, biggest debt. This practice is known as “snowballing” in the financial planning industry because the amount of money you send in to each payment gradually snowballs as each debt is reduced until you are sending in large amounts of cash to attack your biggest, and last, debt

Someone who had a $10,000 balance on a Bank of America credit card, a $3,000 department store credit card, and a $1,000 gas station credit card would send in all their extra money to the $1,000 gas station card. Once this debt was removed, they would take all of the money that had been going to it and attack the $3,000 department store card. This cycle repeats until all of the debts are repaid. It really is an effective way to reduce and pay off credit card debt and it’s easy to understand.

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