You just opened your most recent credit card statement, took one look and nearly fainted. You know you have just too much debt, but what can you do? It’s just very difficult to get out from under a large load of debt unless you win the Publishers Clearing House Sweepstakes or the lottery. To make matters worse, when you’re heavily in debt, it can eat up so much of your income you may have a problem keeping by up with the rest of your obligations.
One good way to pay off multiple credit cards is to use the “debt snowball” tactic to become debt free. You can thank Dave Ramsey for making this method of reducing debt popular.
How to use the debt snowball tactic
To use this strategy, you will need to put your debts in order ranging from the one with the lowest balance to the one that has the highest balance. You do not pay any attention to the interest rates.
Next, pay as much as you can on the lowest debt while making just the minimum monthly payments on all the others. You devote all available cash to the smallest debt to get it paid off as fast as possible.
Yes, you will end up paying more interest than other debt reduction methods but you’re more likely to stick to the debt snowball because of the psychological boost when you see one of your credit card statements with a zero balance.
In fact, paying off the credit card with the highest interest rate first is the best way to get rid of your debt. But if your highest APR debt is also the highest balance then it could take years to see a zero balance. Compare that to the snowball method where you can have one of your debts paid off in months and maintain momentum to getting out of debt.
What to do next
Then, once you’ve paid off the first credit card, focus on the one with the next lowest balance. Next, pay off the credit card or loan with the third lowest balance and so on. If you keep doing this you will eventually become debt free.
It won’t be easy
And yes, it won’t be easy. It might take several years to get all that credit card debt, student loans, medical bills, and auto loans paid off. You also have to be careful to not run up any more debts while you’re paying off those credit cards. But if you do follow this plan you will eventually become debt free and have a much better, less stressful life.
The debt snowball may not be the most cost effective way to reduce your debts but it offers you one of the highest chances of successfully paying off your debts because it is a plan you can stick to.