Which Method For The Madness?

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There’s a lot of talk from financial guru’s like Suze Orman and Dave Ramsey about which method is best for paying off credit card debt. To get my credit cards paid off I used my own method. (When I started the Spending Fast I hadn’t even heard of Dave Ramsey). I should share it since it worked for me.

And Then She Saved’s Method for paying off credit card debt (this is what I did):

Step 1 – Write down all the credit cards you have.

Step 2 – Call the credit companies and ask them what your current balance is and most importantly, what is the interest rate on the card? (I had no idea what they were when I called them and was shocked to find out how much they were and ohmigosh the rate is listed on the bill they send out)

Step 3 – While on the phone with the company ask them to lower the interest rate. Some will do it. It’s worth a shot huh.

Step 4 – Okay, now that you have the card balances with the interest rates write the highest interest rate credit card at the top to the lowest interest rate card at the bottom.

Step 5 – Pay the absolute max you can every month on the highest interest rate card until it’s wiped out while paying the minimum on the others. (Luckily the credit card that had the highest interest rate for wasn’t the credit card with the highest balance so it was a morale booster to eliminate that relatively quickly)

Step 6 –  Once that highest interest rate card is paid off you will be able to increase the amount you send to the next card on your list. Continue until ALL of your cards are paid off and then do the same method on your other debts.

My order of attack: credit cards, loan from parents, college loans.

And there you have it!

And… The Guru’s Methods…


Dave Ramsey’s Snowball Method for paying off credit cards:

Step 1 – Make a list of all your credit cards, ranked in order from the highest balance to the smallest balance.

Step 2 – Beginning with the card with the smallest balance, pay as much as you can on that card while paying the minimums on the other cards.

Step 3 – Once the card with the smallest balance is paid off, take the amount you were paying towards that card and apply to the card with the next lowest balance.

Step 4 – Keep on keepin’ on until ALL the cards are paid off.


Suze Orman’s Method found in The Road to Wealth:

Step 1 – Figure out the largest possible amount you can afford to pay each month toward all your credit card balances together.

Step 2 – Add $10 to each minimum payment that your credit card company is asking you to pay.

Step 3 – Add up all your minimum payments plus $10 added for each card.

Step 4 – Hopefully the difference between the figure found in Step 1 is GREATER than the figure in found in Step 3. If so, apply the difference to the card with the HIGHEST interest rate.

Step 5 – Once that card is paid off, you continue the process (Steps 1 – 4) until ALL the cards are paid off.


8 thoughts on “Which Method For The Madness?

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  1. Audrey

    Outstanding advice! This is pretty much what we did 13 years ago when we had a new baby and decided I would be a WAHM. We also promised ourselves that once the balances were gone that we'd use only one card…
    and that if there was ever a month that we didn't pay off the balance in full, we cut up that card. It has worked well for us and it was a huge relief not to be buried in debt when my DH was laid off in 2009.

    All the best,

  2. Noe

    Im in the process of using Dave Ramsey's Method. It really helps when you see your hard work pay off quickly by attacking a credit card with a low amount.

  3. Audrey

    I follow Dave Ramsey too but didn't know about him yet back then. I especially like his "401Dave" plan for his kids.
    Love Crown financial ministries too. Their envelope budgeting system seems to work really well for a lot of people.

  4. AnnaMesh

    Generally, you can request a lower interest rate after 6 months of "good behavior" (AKA on-time payments). Also, creditors often will lower your APY slightly (say .5%) 6-12 months of good behavior (dependent upon the lender) anyway…so it's always worth a shot asking for a deeper reduction! I keep a spreadsheet of my credit card debt that tracks the net impact of each payment versus accrued interest; it feels great when I can take the APY down a notch!

  5. Pat

    In order to assist my daughter, son-in-law, and family in getting out of debt recently, I laid out a financial plan to show them how to get out of debt. At the same time I gave them enough money to pay off the four smallest credit cards leaving them with one payment. That one credit card amounted to $13,000 which could be paid off in two and a half years with my plan. They had to promise not to make any more charges, put at least $1,000 (from the paid-off accounts) in savings for emergencies, and then to put the monthly amount saved from the accounts I paid off against the one credit card left. They were really struggling and now their whole attitude toward their financial situation has changed. I don't think they will ever be in debt again.

  6. Thomas

    I know this is a late comment….but I enjoyed this article! ( I just stumbled across your site, great stuff).

    Two things:
    #1 When you call the credit card companies, don’t just ask for a lower interest rate. You this line, verbatim: “Can I enroll in a hardship program?”

    Sounds silly, but those are the keywords.

    #2 Good for you in the way you paid off your debt. There are many names for it, but I think it is best referred to as the debt ladder.


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