Paying Down Your Credit Cards

Where to Begin


Getting into credit card debt is easy – just ask the millions of consumers already wallowing in it. Getting back out of debt is the hard part, but fear not – it CAN be done. All it takes is careful planning, a lot of discipline, and a little time, and you can live your life worry- and debt-free. Here’s how:

What can you afford to pay?

This is the all-important first question you need to ask yourself before you set about coming up with a payment plan. Figure out how much you have to pay off before your debts are wiped out, and how much you can afford to put down each month.

Start by gathering all of your monthly bills and pay stubs together, and use them to draft up a working monthly budget for yourself. Once you have an idea of how much you make each month vs. how much you spend, you’ll have a better idea of how much you’ll be able to sock away for debt settlement each month.

Your best bets

There are basically 2 schools of thought as to the best method for paying off your credit card debts.

Start with the lowest balance.
This option has you paying your debts down from smallest to largest balance. This is usually the easier method of the two for people to get behind, as it quickly produces noticeable results. Once you see how quickly your smaller debts are falling by the wayside, you’re more easily encouraged to stick with your repayment plan.

Start with the highest interest rate.
This option makes more sense from a purely mathematical standpoint, but it can be difficult to stick with, as the payoffs aren’t as fast or as often as the lowest balance first method. Paying off your higher interest cards makes sense because the longer you leave them unattended, the more interest you’ll accrue and have to pay off later.

What’s the best method for me?

This is really a question only you can answer. If you value immediate satisfaction, stick with paying your cards down starting with the lowest balance. If you’d rather not be mired in interest payments for the next few years – and you aren’t easily deterred – start with the accounts with the highest interest rate.

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