Debt Consolidation Credit Counseling In Phoenix

Americans have on average three credit cards per household carrying a combined balance of nearly 12,000 thousand dollars and most are just paying the minimum payment due.

You are already aware that this is taking you deeper into debt and further from debt elimination. In fact, your balances are likely growing on you seemingly moment by moment. Do not give up there is a better way!

There is a plan that will help you pay down then pay off all your credit cards! Think about it, you taking control of your financial future. This simple plan is like a credit card snowball effect.

Snowballs start out small and unassuming by rolling them around they will grow in a hurry! Now apply this concept to paying down your balance, start with a little extra and watch it snowball until the card is clear of any balance!

Credit cards grow so fast due to something called compound interest. To put it simply when you only make the minimum payment you likely are not even covering the interest. Now that interest ends up as part of the balance and next month, you will be assessed interest on the new balance. Sound like a credit card snowball?

First, look at the common practice for paying off credit card debt. This is what conventional wisdom says is the best debt elimination practice:

List all your credit cards

Choose the one with the highest interest rate

Pay extra on the card with the highest interest percentage.

Repeat this process for all of your cards as you pay them off.

At first, the glance this seems like a reasonable plan for debt elimination. However, this is not always the best course of action.

No two credit cards will have the exact same interest rate. Conventional wisdom says that it only makes sense to pay off highest interest rates. However, look at the example numbers below.

For example, let us say you have three credit cards with interest ranging from 5% to 20%. Now assume that one of the cards has a $5,000 balance at 10% interest, which is fifty dollars per month in interest. The highest interest rate you have, 20% is on a card with a $2,000 balance, equaling forty dollars per month in interest.

The above example just goes to show that higher interest is not always the enemy of your debt elimination. The credit card snowball effect will quickly take your balance to new heights. Particularly if you are only making the minimum, payment required.

To use the credit card snowball effect your plan might look more like this:

Make a list of all your credit cards.

Choose the one with the highest interest accrual each month.

Put all the extra money on this cards.

Keep all other cards at minimum to free up cash to pay off the first card.

Continue in this manner until all cards have a zero balance.

Life often has many paths to the same goal. Credit cards and debt elimination are no different. Always consider things from all angles before embarking on your debt elimination process.