How to Eliminate Credit Card Debt with the Snowball Method

Credit card debt can seem overwhelming, especially if you're reduced to making the minimum monthly payment to keep your head above water. Getting out of credit card debt takes a little discipline and a good plan. The snowball method is one of the fastest and most efficient ways to eliminate credit card debt. Here's how it works.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Credit card statements
• Calculator
• Pen and paper

1. Assemble all your credit card bills, income statements, household bills and bank statements.

2. Add up all your household income for the month.

3. Add up all your household expenses. Use the minimum monthly payment on your credit card bills.

4. Subtract your monthly expenses from your monthly income. This is the amount of money that you have to put toward getting out of debt - your snowball.

5. When you pay your bills, add the "snowball" to the minimum monthly payment on the credit card with the lowest total balance until you have totally paid off that credit card bill.

6. Add the minimum monthly payment on the bill you have just paid off to your snowball. For example, if your snowball was $125 and the minimum monthly due on your lowest balance credit card was $30, your snowball has just grown to $155.

7. Add your snowball amount to the minimum monthly payment on the next highest credit card balance. If that minimum monthly payment is $40, you'll pay the minimum plus the snowball - or $195 per month, in our example - until that bill is paid off in full.

8. Continue in this manner, growing your snowball with each credit card you pay off. By eliminating one outstanding balance at a time, you'll keep increasing the amount of money you have available to apply to the next credit card balance.

9. Keep one credit card for emergency use. Once you've paid off all of your credit cards, you can start banking your entire snowball every month and build your savings.

Tips & Warnings

• If you get unexpected extra money, add it to your snowball for that month.
• Keep your oldest credit card active. Most credit reporting agencies consider the age of your oldest credit card when deciding your credit score.
• Be careful not to build up more debt by using your credit cards after you clear the balance.

Resources

• The Real Truth About Credit Card Debt

[thedogshrink]

on 1/15/2009 Really good idea! 5*

[chameleon]

on 12/7/2008 Thanks for the stars! This is the best method I've ever seen to dig yourself out of debt so I just had to share it with others.

[IcyCucky]

on 12/7/2008 This is a really great idea! 5*