Paying down credit card debt is not the easiest thing in the world. The math behind credit card debt is not something that works in your favor. Just look at the interest rates that credit card companies charge. You’ll see that paying down credit card debt is just not an easy thing to do if you do it the way that most people do it, but there is an easier way.

Let’s start paying down credit card debt…

Here is the first rule and maybe the most important. You have to stop spending money using your credit cards. If you are paying down one card while putting money on another, you aren’t going to ever get out of debt. So, you have to pay down your credit cards by not putting money on them. One awesome trick I saw on Get Rich Slowly years ago was to put your credit card on ice so that you can’t easily spend using it. That’s a funny trick, but it makes a lot of sense.

So, you’ve stopped using your credit cards. Great. That is a good first start.

Now, you need to use what Dave Ramsey calls the snowball method to debt reduction. It’s simple. You just pick the smallest balance credit card and pay that off first. Then, you take the monthly payment you were using on that card and apply it to the next card along with what you were already paying. Then, once that is paid off you keep going and going like the energizer bunny until all of your debt is totally paid off.

For example… Say you have a credit card with a $500 balance and a $25 monthly payment along with two other credit cards that you owe say $2,000 and $4,000 with say a $100 and a $200 monthly payment. What you would do is pay off the $500 credit card as fast as you can. Then, take the $25 a month and add it to the $100/month payment you are making on the $2,000 credit card. Then, once that is done, you apply the $125 a month on top of the $200 monthly payment. You now get $375 a month that you would be paying down on your $4000 credit card.

Other ways to pay down credit card debt

Now, there are a couple other things you can do to make this go a bit faster/cheaper/easier. One, you can take advantage of balance transfers to save money on interest and pay down some cards faster. If you have some smaller balances, you can balance transfer them to some cards for a small fee or even just a few percent. The fee might be around 3%. This can save you 20% interest over the course of a year, which can add up. You are moving money to an account with a higher balance, but getting a 0% interest rate for some period of time, like say a year or so. Depending on how much of a balance transfer you do, this can be worth a lot of money saved.

Another option is a debt consolidation loan, which can be a good thing if you use it as a way to pay off your debt quicker. However, many people use them as a way to just go out and start spending again because their monthly payments are lower. If your goal is to be debt free, which is a truly remarkable thing nowadays, you can’t keep spending money like most people do.

The last thing you can do to pay down your debt quicker is to use any small windfalls you have – like a tax return, bonus at work, or whatnot to pay down credit card debt. This not only moves your snowball down the hill faster, it also pays a near instant return for years and years. A $1,000 bonus to pay down credit card debt would pay back something like $200-300 a year. The stock market is not going to get you a guaranteed 20% a year return.

You got to keep at it

The real trick to paying down credit card debt is just to keep hammering away at it. There are a lot of little ways to save money and to stop spending and that all helps. But, if you have a mountain of debt to pay off, it is going to take time and patience to be 100% debt free. You just have to keep making the right choice. Keep using things like the snowball debt reduction method to pay off your debt faster. Then, once you are out of debt, don’t let yourself go back in to debt again!

-Brian

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