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.