Credit Card Payoff Strategies
Your strategy for paying off credit card debt may be different than mine. However, now that the New Year is in full effect, it is a good time to come up with a plan and stick to it! Let us look at three popular strategies to pay off credit card debt.
The Vulcan Strategy – Pay Down High Interest Rates
At first glance, this one seems the most logical. Debt on your highest interest rate cards costs you the most. Your attack plan would consist of trying to pay down cards that cost you the most before you pay down lower interest rate ones.
If one card charges 22% interest and another card only charges 11%, it would seem sensible to pay down the first card (with the highest interest) first.
The Feel Good Strategy – Attack the Lowest Balances First
I am not a Vulcan, but a human. If you are also human, it may be much easier to stick to your plan if you can make some fast progress. If you decide to use this strategy, you may decide to clear your card with a $250 balance before you try to attack the card with a $2,500 balance. That way, you will make fast progress.
Security Strategy – Clear Emergency Cards
This is actually my favorite strategy. I like to keep a card or 2 clear in case I need to use them for emergencies. This gives me a sense of security because I will have a simple source of credit to use in case I need to pay a dentist or get my car fixed in a hurry. When I have that sense of security, it is easier for me to spend cash on paying off my other cards.
This may be combined with the feel good strategy of paying down the lowest balances first. The problem with the first strategy is that it may not help me clear any cards quickly or provide me with any sense of security or progress..
If you enjoyed this post, make sure you subscribe to my RSS feed!
