Why a Debt Snowball Can be Bad
Before you reach the precipice and you feel your debts are about to create a financial avalanche, start managing a plan to pay off credit card debt. Before starting any credit card reduction program, identify areas where you can cut down your expenses, including fancy lunches on your Visa or spontaneous shopping sprees with your AmEx. Paying beyond the minimum due on a credit card is the second step in paying down credit card debt. But which credit card do you pay off first?
The Debt Snowball
Personal finance author and radio personality Dave Ramsey proposes that consumers can pay down their debt by paying off the credit cards with the smallest balances first, and bravely work up to the larger balances. For example, a family might have cut back on expenses to find an extra $300 per month they can apply to paying down credit card debt.
If they take that $300 and put it towards their Discover card, which has a balance of $900, they can pay off that card in three months.