Pay Off Your Credit Card Bill Using The Snowball Method

Juggling more than one credit card payment every month can be stressful, and making minimum payments will ensure that you pay a lot of interest without being able to fully pay off your credit card bill for a long time.

There are several ways of consolidating credit card debt but one of the most effective for many people is what is known as the "snowball" method. Using this method, you basically focus on one card at a time, paying each one off as you go.

The first step is to make a list of all your cards with their minimum payments, interest rates, and current balances.

The next step is to determine how much extra you are able to pay every month towards the balances, while still making the minimum payment on all cards.

Starting with the credit card with the lowest balance, add that extra payment amount to the minimum payment every month, until that card is fully paid off.

Once the first card is paid off, take the card with the next highest balance and do the same. Add the payment you were making on the first card to the minimum payment for the second card and pay that amount every month until that card is fully paid off.

Continue doing this - adding the payment from the cleared card to the minimum for the card with the next lowest balance - until all cards are paid off.

Alternative Ways To Use The Snowball Method

By focusing on the cards with the smallest balance, you will be able to see faster results which can be a big motivator for a lot of people. There is a disadvantage to doing it this way, however.

Starting with the lowest balance means it will cost you more money in interest before the cards are all paid off. Because the interest compounds, it will add up faster on the cards with higher balances. Plus, the card with the lowest balance may not have the highest interest rates so you could also wind up paying more interest here as well.

If minimizing the interest paid is your main concern, you can either start with the credit card with highest balance or the one with the highest interest rate and then work through them the same way - when one is paid off, move to the next highest.

This method will take longer to get the first cards paid off, however, so it will take willpower to continue making the extra payments.

If willpower is a problem - and it often is the reason for the credit card debt in the first place - then it may be better to pay extra interest to choose the more motivating method.

Read the next article about the pros & cons of paying bills with a credit card.

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