Eliminate Debt Faster Using the Credit Card Snowball Effect
If you are like millions of other people on the planet, you likely have at least three credit cards with balances of ten to twelve thousand dollars. In addition, you are probably still only paying the minimum payment.
As everyone knows that plan will take you, no where on the path to debt elimination. You will simply sit and spin your wheels hoping that you win the lottery so you can pay off these balances. What if there was a better way?
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.
Snowballs start out small and unassuming by rolling them around they will grow in a hurry! Now apply this concept to paying down your balance, start with a little extra and watch it snowball until the card is clear of any balance!
A wise person once said that those who refuse to learn about compound interest are doomed to pay it. No truer words were ever spoken! Therefore, lets begin to learn and turn the credit card snowball effect in your favor and put you on the right path to debt elimination.
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.
Write down all your cards.
Choose the one with the highest interest rate
Add extra money each month to the card with the highest rate until it is paid off.
Repeat this process for all of your cards as you pay them off.
At first, the glance this seems like a reasonable plan for debt elimination. However, this is not always the best course of action.
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.
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.
Let's take another look of how to use the credit card snowball effect to your advantage:
Make a list of all your credit cards.
Start with the one that accrues the highest interest every month.
Add extra payments to this card until the balance is zero.
Pay the minimum on others until the card with the highest interest accrual is at zero.
Rinse, lather and repeat for all the cards in your wallet.
Looking at it, this way it is easy to see that this will be the fastest road to debt elimination. It is important to always consider financial issues from many angles. This is doubly true with credit cards.
As everyone knows that plan will take you, no where on the path to debt elimination. You will simply sit and spin your wheels hoping that you win the lottery so you can pay off these balances. What if there was a better way?
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.
Snowballs start out small and unassuming by rolling them around they will grow in a hurry! Now apply this concept to paying down your balance, start with a little extra and watch it snowball until the card is clear of any balance!
A wise person once said that those who refuse to learn about compound interest are doomed to pay it. No truer words were ever spoken! Therefore, lets begin to learn and turn the credit card snowball effect in your favor and put you on the right path to debt elimination.
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.
Write down all your cards.
Choose the one with the highest interest rate
Add extra money each month to the card with the highest rate until it is paid off.
Repeat this process for all of your cards as you pay them off.
At first, the glance this seems like a reasonable plan for debt elimination. However, this is not always the best course of action.
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.
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.
Let's take another look of how to use the credit card snowball effect to your advantage:
Make a list of all your credit cards.
Start with the one that accrues the highest interest every month.
Add extra payments to this card until the balance is zero.
Pay the minimum on others until the card with the highest interest accrual is at zero.
Rinse, lather and repeat for all the cards in your wallet.
Looking at it, this way it is easy to see that this will be the fastest road to debt elimination. It is important to always consider financial issues from many angles. This is doubly true with credit cards.
About the Author:
Philip Crafton is an expert in managing your credit, he has mutilple years of 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
posted by Debt Consolidation Loan at
3:07 AM
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