The world today is all about ease, thus credit cards fit right in. Credit cards have the ability to make life much easier, because you can make purchases without carrying around a sum of cash. Many people may abuse this and thus accumulate credit card debt. Stated below are ways that debt can get out of hand on a credit card if not watched closely and how to combat that debt.
Most people tend to pay just the minimal payment on a credit card each month. This can become discouraging because it will seem as if the payments will never be over, for most of the payment will become interest charges. This can cause debt to persist for years, and if the debt is large enough then decades.
photo credit: Daquella manera
Another way to assist in a slow debt payoff is to pay on all your credit cards equally at once. This seems like a good idea but it really is not, because the interest will still be applied every time thus increasing the amount of time used to pay the debt. A better option would be to pay on all the credit cards equally except one. The one you choose to pay more one depending on the balance or days late the payment may be, will have more paid to it than the other cards. This way in a shorter amount of time a card can be paid off and done with. Then you can apply the same strategy to the next card.
The term debt snowball comes into play when dealing with paying off debts. As stated above this is when all credit cards are paid on but one is paid more on in order to pay it off. So how do you know which order to pay your debts off in? Many will say whichever debt has the highest interest rate.
This is because if a form of debt has a higher interest rate than all the others it has the ability to cause more money to be paid out than the other forms of debt. If you pay off a high interst debt first than technically money is saved in the long run. Also if you have a lot of debts to deal with a debt with a low interest rate would be best to carry over every month for the opposite reason as stated above.