Credit Card Debt and The Best Method To Eliminate It

Hello and welcome to my blog! My name is Taylor, and I am here to assist you to achieve debt freedom. I’m not going to lie to you it takes time and a lot of patience. There is no quick fix to getting out of credit card debt. Well maybe if you marry a whale full of cash, but for the rest of us peasants it will take sweat, grit, and time.

Nevertheless, do not worry I am here for support and to give you the tips I have learned over the years! So here we go! Buckle up and get ready for my most favorite method of bringing down credit card debt.

 

What is the Snowball Effect and How To Use it For Credit Card Debt?

Essentially the snowball effect is taking the smallest amount of your credit card account and focusing on just that one. While this may be true, that does not mean neglect your other credit cards because let’s be real they have abandonment issues and will being to call you non stop. We don’t want that. In other words, you would pay the minimum monthly payment on your other cards and spend the most you can on the account with the lowest remaining balance. To reiterate, we do not neglect the other credit cards; we pay the smallest amount possible! The not ignoring your credit cards is very important. Notice I am repeating my self to show it is essential!

Let’s Do an Example: 

We have figured out our budget by using this previous blog post, and we are now ready to move some money around. To explain the Snowball effect better, let’s say we have five different credit cards. Credit card A has $500.00, Credit card B has $2,500.00, Credit card C has $250.00, Credit card D has $650.00, and Credit card E has $800.00. As a result, all together we have $4,700.00 of credit card debt.  You can also use this Debt Repayment Calculator with Credit.com for this exercise if math is not your forte. Let’s say $25.00 is the minimum on your cards. Are they? Probably not, but for the example’s sake lets lie and say yes. We are going to pay $25.00 on every card, but Credit card C. Now for Credit Card C let’s spend $100.00 a month.

In your first month, you would bring your credit card debt down to:

Credit Card A: $475.00, Credit Card B: $2,475.00, Credit Card C: $150.00, Credit Card D: $625.00, and Credit Card E: $775.00.

Meanwhile, there will be interest added every month so that it would be more than this, but don’t get disheartened. The snowball method is tried and true! Let’s fast forward three months in our example above. We are now in month three. Woohoo! Look at us go! We are now at:

Credit Card A: $375.00, Credit Card B: $2,425.00, Credit Card C: $0.00, Credit Card D: $575.00, and Credit Card E: $725.00.

 

How It Works:

Notice how Credit Card C is now at $0.00, but wait there is more! In addition to Credit Card C, Credit card A has also decreased quite a bit. As a result, in month three Credit Card C only had $50.00 bucks left this month to be completely clear of debt. So what did we do with the extra $50.00 we had? No, we did not get our nails done or buy our cat a new kitty condo. We added it to Credit Card A! As you break up with each credit card you add the original $25.00 to the next card you are ready to pay eliminate. During three months we have already removed one card from out nice sized debt collection. Can you imagine what would happen in a year of doing this? You don’t need to believe because I will give you the details below just for inspiration.

Credit Card A: $0.00, Credit Card B: $1,475.00, Credit Card C: $0.00, Credit Card D: $0.00, and credit card E: $0.00.

Results From The Credit Card Debt Example:

Wow! In conclusion, we are now down to just one credit card! How exciting! Keep using this method, and you will be credit card debt free, depending on the amount, in a year to three years. I know it sounds like a long time, but remember it is so worth it when you look at your credit score. The amount you pay in interest is lower than if you kept paying the minimum on all of your cards. You get approved for better apartments, houses, and cars!  Most importantly, you no longer have this massive stress looming over your head, and that enough should make you want to take the first step at removing this debt.

Xoxo,

Your Finance Fairy