How To Reduce Credit Debt

Credit card debt is one of the biggest causes of stress and anxiety for many people in today's world. Unfortunately, too many people get caught in the credit card companies' web, spending more than they can afford. Eventually this will catch up with you, and you'll be faced with having to pay back all that debt. There are some ways to reduce credit debt faster though - one of the most effective being the "Snowball Method".

The snowball method is a term coined by Dave Ramsey, and is ideal for anyone who has balances outstanding on more than one credit card.

When dealing with this debt credit card statistics have shown that most people make little more than the minimum monthly payments. If you only make the minimum payments on your cards every month, you are hardly reducing the total balance at all and it could take as long as 20 years to pay them off. Do you really want to still be paying for that new outfit or the latest high-tech toy 20 years from now?

Of all the credit card debt programs, the snowball method is one of the easiest to implement - although it takes willpower and self-control to make it work for you.

The first step is to make a list of all your credit cards, their outstanding balances, and the minimum payments on each one. Put them in order from the lowest outstanding balance to the highest.

Now figure out how much extra you can pay towards your debt every month after you make all the minimum payments. You're going to add this amount to the minimum payment on the card with the lowest balance, and pay that amount every month until that card is paid off.

In other words, you'll be making the minimum payments on all but the card with the lowest outstanding balance. That card will be getting all the extra money you can add to its payment every month.

When the first card is paid off, take the total payment that was being made on it and add that amount to the minimum payment on the card with the next lowest outstanding balance.

When that second card is paid off, do the same for the next card, then the next and continue to "roll" the payments onto the next card until they are all paid off.

Another option is to put your cards in order of interest rate instead of outstanding balance. In other words, the card with the highest interest rate gets paid off first, then the second highest and so on until they are all paid.

Starting with the lowest balance has the advantage that you'll see results quicker - the first card will be paid off faster than by starting with a higher balance card. This will cost more in interest if the higher balance cards have higher interest rates, however. You'll have to decide whether you need the extra motivation that comes with paying off your credit erasing that card's balance, or if you would prefer to save as much interest as possible.

There are plenty of credit card debt companies ready to "help" you get out of debt (collecting fees from you while they do so) but if you have the willpower to stop spending money and focus on paying off your cards, the Snowball Method is an excellent method for debt reduction.

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