Best way to get out of debt?

Question

I am not too far in, I owe a total of 3,000 for all of my credit cards and some other bills. I make a good living, for being in college... but Im just wondering whats the easiest way to go about it, like should I try to pay the lower rate cards first, or the cards with the lowest balance? Thanks!

Answer 1

Pay the lowest balance first. Keep paying all your minimum payments but pay more on the small balance.That way you accomplish something fast and then you keep motivated. Then take the payment you were using on that credit card and move it to the next credit card. It is called a debt snow ball.

Example:
Visa: $200 balance, you pay $50/ month ($20 minimum +30 extra)
Discover: $800, you pay (minimum) of $50
MasterCard: $2000, you pay (minimum) of $100
When the Visa is paid off, add the $50 you were paying on the Visa to the Discover for total payment of $50 and then when the discover is done, add the $100 ($50 from visa, $50 from discover) to the MasterCard.

To stop using credit cards, you need about a $500-1000 emergency fund in a savings account so when the brakes go out on your car, you can pay cash instead of use a credit card.

I suggest reading: The Total Money Makeover by Dave Ramsey, if you are serious about getting out of debt, staying out of debt and becoming wealthy.

Answer 2

$3,000 isn't a large amount of debt, but it could continue to climb if you don't corral it now.

The best method to reduce the debt is to do a balance transfer. If you've got good credit, my recommendation is to open a new credit card with Amex or Citibank that offers 0% APR for 12 months on balance transfers. These two banks also don't charge a balance transfer fee in most cases, but double-check the terms to be sure.

You should be able to balance transfer the entire $3000 and at that point you won't pay any interest for 12 months. If you can, try to pay $250 a month and you'll be free and clear by the end of the 12 month period. Some of the cards even offer 15 months of 0% APR, so you could drop the monthly payment to $200 a month and be free of that debt.

Learn more at http://www.thetruthaboutcreditcards.com

Answer 3

I would start by paying the smaller bills first. Get them out of the way. If possible try and keep up with the minimum payments to keep your credit rating strong. But paying off the easier ones first will just get them out of the way to concentrate on the higher ones. It worked for me.
Also, call the credit card company to ensure that the payments you are making are applied to the balance and not the interest.

Answer 4

Pay the highest rate cards first, always. Remember, no matter what you "pay" first, youll have the same amount of balance, no matter which debt you pay. So it doesnt matter the size of card, what you need to do is eliminate the debts charging you the most interest first.

Sometimes it helps out to combine them all on to one card, possibly at a lower rate.

After you pay down the cards, cut up as many as you possibly can. I like to keep one with a decent limit for emergencies, but you should not have a wallet full of them like many college students do.

When my wife and I got married, we had about 15 cards together. We now have 2.

Answer 5

Pay off the cards with the HIGHEST rate first...not the lowest rate.

Or, transfer the balance of all the cards to a single card with a low balance-transfer rate. Just make sure the balance-transfer rate is good until the whole balance is paid off...not just an introductory rate.

Answer 6

I would have to agree with Big Jimi. Carry no credit cards and then you won't have to worry about getting in contact with your bank(s)/credit union for it's easy to lose credit cards or get them stolen. What a hassle! Also remember that identity theft is on the rise. Better to just use cash, money orders, debit cards, and/or other things like that.

BTW, I feel bad for not crediting you the "best answer." You know, for the answer you gave me to my poll for shoes/sneakers (brands), where I said that I don't wear shoes. I should have chosen & credited you, but I chose someone else instead (who I now believe has the second "best answer." Oh well, can't change it now.

Have a good day sweetie :)

Answer 7

The best way to get out of debt is to quit spending money you don't have. It's called "living within your means."

Definitely start making payments on all cards, especially the ones with the highest interest rates. Also make sure you always pay more than the minimum required payment.

Answer 8

first thing to do is find out what put you into debt and stop it. then get your cards lined up from lowest balance to highest. pay off the lowest first as fast as you can. and pay the minimum of the rest until the lowest balance card is paid off. then got for the next lowest and then the next lowest until you are debt free. then after that you just have to discipline yourself not to spend more money than you can pay for.

do what mldjay said

Answer 9

Look at how much each card is costing you each month.

For instance.

I paid 45 dollars of interest on card a
I paid 20 dollars of interest on card b

Pay card a down first. Maybe you can transfer some of the balance from card a to card b for a lower interest rate.
Bottom line look at which instrument of debt is costing you the most to carry.

Answer 10

Its all about disipline. Im also paying off my card. I owed 8000 euro's and it was like that for two years. I only paid the interest. I woke up one day and I got serious and I now only owe 5000 euro. I hope to pay it all off 18 months time. I also ripped up the card so I could'nt use it again. You know what to do so just do it. Good luck xxx