By Roman Shteyn of Credit-land.com
NEW YORK (MainStreet) — OK, so you overspent for the holidays. Join the club. The bill is in the mail.
If you can pay off the balance on that credit card in full and incur no interest charges, you are in the clear. But if that bill is joining a few other cards with balances, you will need a pay-down strategy.
Everyone struggles to get out of debt at one time or another in their life. Unfortunately, without a clearly defined plan you can actually stick to, credit card balances never seems to shrink despite your efforts. To make a dent in your debt, do some number crunching — and even some soul searching — to see which of these payoff plans is right for you.
The snowball method
One way is the snowball method, which has nothing to do with the weather. The idea is to take baby steps, paying the lowest balances first to get some momentum and motivation. By focusing all of your extra money toward your lowest balance and paying just the minimum on your other accounts, you can hopefully pay at least one balance off in a short time. Then you can parlay the amount you were paying on that account onto the next lowest balance.
Pros: The feeling of accomplishment is similar to the one you get from checking tasks off of a “to-do” list. Paying off a small balance gives you a boost and can encourage you to continue working toward a debt-free life.