When used responsibly, unsecured debt such as credit cards can be an effective part of a financing strategy. As long as the balances are paid off each month, interest charges won’t accrue. With many cards, points are awarded to be used toward future purchases or cash back at the end of the year. But if the cards are used to pay living expenses and aren’t paid in full each month, then they are actually quite expensive. Interest rates can be over 20%, and if a payment is missed, that rate increases. It’s best to pay off outstanding balances and keep them paid off. Here is a simple strategy to begin paying off credit card debt.
Experts agree, when trying to pay down debt, the first thing needed is to take an inventory of all outstanding debt. List credit card debt in chronological order by balance owed. If back taxes to the Internal Revenue Service (IRS) are owed, they take priority. Consider contacting a tax professional who can arrange a debt collection defense Ormond Beach FL, and help negotiate with the IRS.
Each month, make minimum payments on all debt except the one with the smallest balance. Pay more than the minimum on that debt until the balance is paid. Once that debt is paid in full, roll the funds you had previously been paying on the smallest debt and put them towards the next smallest balance. Continue to make the minimum payments on all others. Repeat the process until all debts are paid. This payoff strategy is called the snowball method and has been proven successful for many people.
With high-interest charges on credit card debt, your balance continues to increase well beyond the initial purchase. Try using the snowball method. If you stick with the plan, you will see results, and eventually, the balances will be paid off – as long as you don’t incur any new debt.