What's the Fastest Way to Pay off Credit Card Debt?
By Steve Gillman
If you have much credit card debt, you probably want to pay
it off as quickly as you can. Yes, we all know that creating
debt is simple, all you do is swipe your credit card a few times
at the mall and before you know it you've created debt. Before
outlining how to pay it off, we'll assume you have taken the
first step - you stopped creating more debt. You've changed your
Hopefully you also understand that paying off credit card
balances with a consolidation loan or rolling it into a mortgage
isn't paying it off. In fact, even if you pay a lower interest
rate, you are often worse off. You see, paying on the debt for
many more years usually means paying much more, not less.
Now it is time to learn how to be rid of that credit card
debt fast. First, you have to understand that not all debt is
the same, which, of course, you know. Some of your cards have
a higher interest rate than others. How do you use this fact,
though, to pay off the total debt in the most efficient way?
Credit Card Debt - The Solution
Budget the money to start paying down those balances. Don't
have it? Find it! If you order pizza every week, for example,
you may be spending $60 or $80 per month right there. If you
are serious about getting those debts paid, you may have to eat
$4 frozen pizzas for now. Do what you have to do, and determine
how much you can apply towards the debt each month.
For an example, let's suppose you can budget $300 per month
to pay your credit card balances. We'll also assume that you
have four credit cards, and to keep it simple we'll say the minimum
payment on each is $45. Now, you could just divide your budget
four ways, and pay $75 on each card every month. This, however,
is the wrong way.
You should pay the minimum payment on all the cards but one,
and apply the rest of the budget to that card. Which card? The
one with the highest interest rate, of course. $45 towards each
of the other three cards leaves $165 to apply towards the one
with the highest interest. Continue in this way until this card
debt is paid in full. This is how you pay the least in total
Once the card is paid off, do you have an extra $165 to spend
every month? Not if your serious about paying off your debts!
You should maintain the $300 budget, but again pay the minimums
on the lower interest cards, and the rest on the one with the
highest interest rate. You'll have $210 per month to pay on that
one now, so things will start to get done more quickly.
Just continue this process in the same way. In the end, you'll
be paying $300 every month on your last credit card, and the
balance will be paid off quickly. If you have the opportunity
to transfer balances to lower-interest cards during this time,
do it - but keep paying that $300 per month, and keep allocating
it first to the highest rate cards. This is the fastest way to
pay off those credit card balances.
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