Ways of Paying Down Credit Card Debt

There's no right way to pay off credit card debt. No matter what your method, it's better than just paying your minimum payments and letting your cards carry balances. However, there are different ways you can go about paying down your cards; the method that appeals to you the most is the one you should use to pay your debts.

Importance

It might be easy and convenient to pay only your minimum payments; after all, you'll eventually get to the rest of your balance. However, thinking this way is shortsighted. Paying just your minimums will cost you thousands of dollars in interest. Since the credit card reform laws were enacted in February 2010, you can see how long it will take to pay down your debts and how much interest you'll pay if you only make minimum payments. This should be all the motivation you need to get yourself out of debt now, not later.

Highest Interest Rate First

The best way to reduce the total amount you'll owe on your credit cards is to begin by focusing on the card with the highest interest, since you're paying more interest on it than any other card. Tackle the interest that has been keeping you in debt. Once you have paid this card off, move to the one with the next highest interest rate.

Lowest Balance First

Another method you can employ is to begin by paying off the card with the lowest balance. Paying off a card with a $500 balance is a lot easier to stomach than starting on a card with a $5,000 balance. This method can help you get the ball rolling and allows you the chance to see more immediate success, which will keep you going on your plan to pay down your debts.

Debt Management Assistance

Seek outside help. Computer programs such as ZilchWorks create payment plans for your cards based on your outstanding balances, interest rates and other expenses. Another option is to seek credit counseling and enroll in a debt management program. Debt management programs use their own software to create budgets and can negotiate interest rate reductions for you. However, you must usually pay a monthly fee for this service; furthermore, most debt management companies require you to close out your credit accounts as a condition of the program.