What's Your Strategy?

[Apr 16, 2008.]

 

When you're starting to take charge of your credit card debt, the advice that you read can be just as confusing as those papers that come with your credit card bills. However, there is no right or no wrong way to handle credit card debt, so long as you're paying it down and not creating any more in the process. Here are some strategies that do work and why they might work for you.

1. Pay off the smaller balances first - When you pay off the smaller balances first, you will end up with fewer bills to face each month, which can really help you when you have a number of bills to pay. It will also help you to see instant results from your hard work and budgeting. Try listing out the smaller balances on a piece of paper and check them off as you pay them off.


2. Pay off the credit cards with the highest interest rates - Because these cards can be the ones that end up costing you the most money, doing your best to pay these down first can help to lessen the damage of those interest charges. Make a list of the interest rates for each of your cards and then tackle the ones with the higher rates first, putting as much money in those payments as possible. Or, you can start with just one credit card with a high payment, pay it down, and then move onto the next.


3. Consolidate your bills - Whether through a home equity loan or a debt consolidation service, you might also want to choose to pay off your debt with one single payment and then make smaller payments on this loan each month for a time period. This can help your credit score as well as make you feel less stressed about the debt that you have as your interest rate isn't going to change and you know exactly when your debt will be paid off.


4. Moving from one card to another - What works well for many people is the idea of putting the largest payment possible on a card until it's paid off and then taking the money that you were using for that card's payment and applying it to the payment for the next credit card balance. This helps you pay off the next card more quickly, and the next, and the next...

No matter what route you choose, paying off your credit cards isn't an easy task. With diligence and time, you will start to see results and that's adding up to a higher credit score for you.