Trying to pay off your credit card debt can feel like running on a hamster wheel.
This is especially true if you owe on more than one credit card.
You make payments on all of your credit cards every month, but it just never feels like your getting anywhere. Oh, you see your balances dropping. But the reductions are so small and the progress is so slow that you might feel like you’re running in place.
Having credit card debt hanging over your head can be pretty disheartening. In fact, some begin to feel like that debt will never go away.
The good news is that there is a way to get out from under that credit card debt. And it works whether you’re paying off one credit card or five.
This method is simple to set up, easy to use, and will help you pay off your credit card bills faster than you ever imagined possible.
So what is this magical technique that will help you get out of credit card debt?
It’s called the Snowball Method.
What Is the Snowball Method?
The Snowball Method is a technique designed to help you pay off debts fast. Popularized by Dave Ramsey, who calls it the Debt Snowball, the Snowball Method has helped millions of people become debt free, and faster than they ever dreamed possible.
You can use the Snowball Method to pay off any debt, from medical bills, to student loans. You can use it to pay for your car, or repay the money you borrowed from a friend to start a side business. And the Snowball Method is a great way to pay off your credit card bills.
Below, you’ll find a step-by-step guide to using the Snowbell Method to get out of credit card debt. But here’s a quick description of the Snowball Method.
How the Snowball Method Works
When you use the Snowball Method to pay off your credit card debt, you focus on paying off one credit card at a time.
Every month, you make the minimum payment on all of your credit card bills except one. Then you try to pay as much money as you can towards the card with the smallest balance.
Once that first credit card is paid off, you focus on paying off the card with the next lowest balance. And the amount of money you have to pay of each credit card will grow like a snowball rolling down a snow covered hill.
You’ve probably heard a few tips about dealing with credit card debt, and the Snowball Method seems to go against a lot of them. Some say you should never make just the minimum payment on a credit card.
And another common piece of advice is that you should pay off you’re the card with the highest interest rate first. And these are tips the Snowball Method ignores.
With the Snowball Method, you’re encouraged to make minimum payments on some of your credit cards. And instead of paying off the card with the highest interest rate first, you start with the card that has the lowest balance.
Yes, the Snowball Method seems to go against some seemingly logical advice. But the method has helped millions of people to get out of debt.
So why does it work?
Why the Snowball Method Works
The Snowball Method works for a few reasons. The first is that it’s fast. Using this method, you could have your first credit card paid off in a few months.
You’ll be amazed how good it feels to get rid of one credit card bill. Those good feelings will give your motivation a boost, and you’ll be eager to start paying off the next card.
The problem with some debt reduction methods is that they take so long. The longer a method takes, the harder it can be to see a light at the end of the tunnel.
You can start to believe, on a subconscious level, that the method will never work. And if you start to feel disheartened enough, you’re might give up on a technique before it has a real chance to do some good.
Not only does the Snowball Method work fast, but you can actually see how effective it is.
When you look at the balance on the credit card you’re paying off, and you see that balance dropping drastically from month to month, you’ll begin to feel a sense of satisfaction and accomplishment. And that will give you the motivation you need to stick with the method until your credit card debt is under control.
Another thing the Snowbell Method has going for it is simplicity. You don’t have to be a financial expert to make the method work. In fact, anyone who dreams of being free of credit card debt can use the Snowball Method to make that happen.
The Snowball Method, Step-by-Step
You don’t need any special tools to get started with the Snowball Method. All you need is a pencil, a piece of paper, and a desire to reduce your debt.
The Snowball Method is actually pretty easy to implement. Here’s one way to do it.
1. Make a list of your credit cards.
Step one is to take out that piece of paper, grab a pencil, and make a list of all of the credit cards you owe money on, store credit cards included.
Next to each card, write down the balance you owe on that card. This might require you to pull out your most recent credit card statements.
If you don’t receive statements in the mail for one of your credit cards, you might have to go to the company’s website, sign into your account, and get the information you need that way.
Now you’re going to rearrange the list. In the number one spot, put the credit card with the lowest balance. In spot number two goes the credit card with the next lowest balance. And put the credit card with the highest balance at the bottom of the list.
2. Make note of how much you pay on each card per month.
Now, you have a list of all of your credit cards, with the card you owe the least on at the top of the list. The next is to make note of how much you pay on each card monthly.
If you pay the same exact amount on each of your credit cards every single month, this will be an easy exercise for you. But if the amount you pay on a particular card varies from month to month, you can write down the amount you paid on that card most recently.
Once you’ve written down the amounts you pay on each of your credit cards monthly, add those amounts together to get the total amount you pay towards your credit card debt every month.
3. Find “extra money” in your budget.
The idea behind the Snowball Method is that you devote as much money as you can towards paying off your bills. And the more you pay each month, the faster you will be debt free.
Now you know how much you’re already paying monthly on your credit card bills. Now think of your current expenses, and how much money you have coming in every month. Do you think you can find an extra $50 a month to pay off your credit card debt? How about $100, or $200, or even more?
If we give it some thought, most of us can find some “extra money, usually by decreasing or eliminating some of our current, non-essential expenses.
Think about that $4 coffee you get on the way to work every morning. If you started making your own coffee at home, you’d save $20 a week on designer coffee. And that money could be used to pay off your credit card debt.
How about your current cable package? Do you really watch all of those channels? You don’t have to give up cable television, but you could save money by switching over to a less expensive package.
So how much extra can you spend towards paying off your credit cards? Write that amount down on your sheet of paper.
4. Create your monthly “credit card budget.”
The next part of the process is pretty simple. Just add the amount you already pay on credit card bills each month to the extra money you’ve decided to devote to decreasing your credit card debt. The total is your “credit card budget.”
5. Start paying off the first credit card.
Once you’ve chosen a monthly credit card budget, it’s time to put the Snowball Method into action.
Use money from your credit card budget to start making minimum payments on all but one of your credit cards. The rest of your budget will go towards paying off the card with the lowest balance.
Think about it. If you have a credit card with a balance of $550, and you pay $215 on that card every month, you will have it paid off in just three months.
Just like that, you’ll have one less credit card bill to worry about. You’ll be amazed by how good that makes you feel. And, suddenly, getting out of credit card debt won’t seem so impossible anymore.
6. Pay off one card at a time.
Once you’ve paid off the first credit card, you can start paying off the card with the next lowest balance. And, with one credit card already paid off, you’ll actually be able to pay more on that second card every month.
Remember, the method works like a snowball. Every time you pay off one of your credit cards, you’re monthly payments for the next card will be even bigger.
7. Pay off your last credit card.
Eventually, you’ll have just one credit card left to pay off. It will be the card with the highest balance. And it will probably be the one you thought it would be impossible to ever pay off.
But with just one card left, you can put your entire monthly credit card budget towards paying off that card. The balance might be high to start but, from one month to the next, you’ll see that balance drop drastically.
Before you know it, that card will be paid off too, and you’ll finally be free of credit card debt.
And you know that money you were using to pay off your credit cards every month? Well now that money will be free and clear, and you can use it for whatever you want.
Getting your credit card debt under control is a great feeling. But, once you’re free of credit card debt, does that mean you have to stop using credit cards altogether?
Absolutely not. Credit cards can come in handy. There are even situations in which using a credit card is more advantageous than paying with cash. But here are some tips that can help keep your credit card debt from getting out of hand again.
· Limit yourself to one, maybe two, credit cards. This makes it easier to keep track of how much you are charging, and how much you owe.
· Now’s the time to pay more than the minimum. How much more is up to you. But many financial experts suggest paying at least twice as much as the suggested minimum payment.
· Don’t use your credit card for every day expenses. Using your credit card to buy $10 worth of groceries, or to pay for a $20 lunch, might not sound like a big deal.
But all of those small expenses can quickly add up. Instead, pay cash for these types of expenses. You’ll find that stuff you’d buy without hesitation when using a credit card won’t seem as appealing when you have to pay for it with cash.
As a result, you might end up spending less. Are you tired of running on the hamster wheel of credit card debt? If so, the Snowball Method is one way to break free fast.
If you commit as much money as you can every month to paying off your credit card bills, you’ll be free of credit card debt faster than you ever thought possible.