How to Calculate Credit Card Accelerated Debt Payoff

Using accelerated debt payoff is a way to get your credit card debt under control and systematically eliminate it. By budgeting a set amount of money to pay towards credit cards and targeting one card at a time, you roll an increasingly larger amount of money from one card to the next as they get paid off.

Instructions

Difficulty: Easy

1. Resolve to stop making any new charges to your credit cards. Hide them in a hard-to-reach location if necessary. Develop a budget to live within your means.
2. Calculate how much total you are paying each month in credit card payments. Look at your bank statements at the actual amounts paid over the past three months and average them by adding them together and dividing by three.
3. Make a chart with four columns labeled: credit card name, total current balance, interest rate and minimum payment.
4. Fill in the chart with all of your credit cards. There are two ways you can rank them, both of which are effective--either with the highest interest rate first or with the lowest total current balance first. You may end up paying slightly less overall if you choose the first method, because you will be paying less in interest. However, if you choose the second method, you pay the first cards off relatively quickly, which gives you momentum and makes you more likely to stick with the program.
5. Add up the "Minimum Payment" column. Subtract that total from the number you calculated in Step 2. The result is your leftover money.
6. Pay the minimum payment due each month on all of the cards except the first card on your list. On that card, pay the minimum payment due plus the leftover money.
7. Continue this payment plan until the first card is totally paid off. Then take the total amount you were paying on the first card--the first card's minimum payment and the leftover money--and add it to the minimum payment due for the second card. Continue until the second card is paid off. Repeat for the third and any subsequent cards by adding the total amount you paid for the previous card to the next card.

Tips & Warnings

• Increase the amount of leftover money by cutting corners wherever you can and adding the savings to your leftover money. This can help you knock out your debt even faster.