The gifts are unwrapped. The decorations have been put away. You’ve toasted the new year. If you are asking yourself, “How am I going to pay off all the credit card bills I rung up?” – Read on.
Rather than panicking about it, start tackling it. There are two ways to address credit card debt: the snowball or the avalanche method.
With both of them, you pay at least the minimum payment on each credit card and don’t add new debt. The next step is what looks different. It will depend on your personality as to which may work best for you.
- Debt avalanche: After all the minimums have been paid, take any extra money you have and use it toward the balance on the credit card with the highest interest rate. If you do this every month, you will save the most in interest payments. The downside – it may not be quite as motivating as the debt snowball method.
- Debt snowball: After all the minimums have been paid, take the credit card with the smallest amount of debt on it and use any extra money you have to pay on that one. Many people find this motivating because they have fewer bills to pay more quickly. However, you do spend more in interest.
Regardless of which one works best for you, the trick is to stick with it and make it a lifelong habit. Even better, make it a lifelong habit to make sure you have enough money in savings to cover your credit card bill to avoid paying interest! Happy New Year!