$1.129 trillion.
That’s the total amount of credit card debt Americans are buried in right now, and it’s on pace to get higher as the country continues to grapple with rising living costs. We all know how expensive credit card balances may be if you carry them over month-to-month, but paying them down can be easier said than done if you don’t employ a fitting strategy first. And it’s not all about what’s going to make most sense for your current financial situation. The plan of attack is also contingent on your personality.
The Avalanche Method
The avalanche methods employs an approach that aims to eliminate high-interest debt first. If you’re more of a “slow and steady wins the race” type of person, this strategy may be for you. Usually, cardholders make their minimum payments on outstanding balances and using their off the bill with the most searing interest rate. Per Investopedia, this is the method that will save you the most money in interest over time.
Snowball Method
This approach involves cardholders paying down the smaller balances in full, usually in an attempt to build morale toward tackling bigger debts in the future. This is fitting if you’re stance on most things is to just “get it over with.”
This method can help quickly tick up your credit score, but there are some drawbacks. This method doesn’t greatly alleviate the overall interest you owe as much as the avalanche approach
So, What Should You Do?
It’s recommened by experts to focus on eliminating the highest interest rate first to put more money back in your pocket over time. However, if you’re motivated by seeing zeroed out balances, wiping out smaller debts could be the best step to take.