|
If you maintain a balance on your credit cards you are probably
paying hundreds of dollars a year in interest. This is money
that could be put to better use.
There is a simple method of paying off credit cards that doesn't
require too much extra money each month. This method is called
payment snowballing. While your biggest gain will be from
paying off credit cards, you can also use this method to pay off
installment loans, your mortgage, medical and other bills.
By snowballing your payment you start paying off credit cards
and adding the money you were paying on the paid off credit card
to the next one. This is one of the quickest ways to eliminate
your credit card debt.
I have developed a simple form to help with this process. At
this point you may want to look at a sample payoff schedule.
You enter the name of the credit card, amount you owe and your
actual payment on the form. Click Here for a printable copy of
"Snowballing Your Credit Card Payment Schedule". You may enter
your figures on this form before you print it. It is best to
list the credit cards in the order you wish to pay them off.
There are two schools of thought about which way is best. Many
experts believe that paying the credit cards with the highest
interest first is best. You then go to the credit card with the
next highest interest and so on. Personally, I believe people
need to see results quickly. I recommend paying off the credit
card with the lowest balance first and then go to the next
lowest balance, etc. Whether you start with the highest interest
rate credit card or the one with the lowest balance it will
ultimately achieve the same results.
Your next step is to determine how much you can afford to pay
toward eliminating the debt. Since you are already making at
least the minimum payment, you can start by adding the minimum
payments for all of your credit cards. Then check your budget
(See The Complete and Bill Organizer http://www.homemoneyhelp.com/BBOonline.html to setup a simple
budget. It's FREE.) to see if you can afford to add any money
to your minimum payments. At the bottom of the payoff schedule
you will find a table to help determine how much you can pay.
Once you have determined how much money you have to put toward
paying off this debt, list it at the top of the form.
Your next step is to establish your scheduled payments for each
credit card. It is best to set a constant payment at or a
little more than the minimum payment to all of the credit cards
except the one you are currently trying to pay off. Keep paying
this constant payment month after month even though your minimum
payment will go down. This alone will make your balance go down
faster than paying the minimum payment.
Refer to the sample payoff schedule. You will see that the Visa
Card will be paid in the 4th month, requiring only a $15 payment
of pay off. These figures are only estimates because they do
not include interest.
Notice that also in the 4th month an additional amount is added
to the Mastercard. To arrive at this figure, you simply add the
$15 you paid toward your visa to the $35 you pay on discover
and deduct it from your allowed amount. Example: $15+$35=$50;
$130-$50=$80
One of the key points to make this system work is that you have
to make a commitment not to use the credit cards. Each purchase
will throw you further behind.
About The Author: Terry Rigg is the author of Living Within Your Means - The Easy Way http://www.homemoneyhelp.com/ebookadpage.html and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site http://www.homemoneyhelp.com. He has 25 years of experience counseling individuals and families concerning their personal finances. Use this email link to get a list of all of Terry's articles by autoresponder at: articlelist@budgetstretcherpremium.com
| 
