Hi sweetiepie! What you’re describing is called the Snowball Method of paying off debt. And yeah, we thoroughly endorse it. Stay with me here while I explain for the whole class.
Card A has $500 on it. Card B has $1,000 on it. Card C has $2,000 on it. Each card has a minimum monthly payment of $20. You can afford to kick in an extra $30 every month toward the debt. So you start out paying this:
Card A: $50 ($20 monthly minimum + $30 extra)
Card B: $20 (the monthly minimum)
Card C: $20 (the monthly minimum)
Eventually, Card A will be paid off! Once that happens, you snowball its payments over into the card with the next highest balance. So you’re still shelling out the same amount of money every month, but you’re taking a larger chunk out of the next card. The payments will then look like this:
Card A: $0 (it’s paid off)
Card B: $70 (the $20 monthly minimum + the $20 minimum for Card A + $30 extra)
Card C: $20 (the monthly minimum)
Eventually that card will be paid off too so you keep snowballing the payments into the next card, like so:
Card A: $0
Card B: 0$
Card C: $90 (monthly minimums for all three cards + $30 extra)
The reason the Snowball Method works so much better than paying all the cards off at the same time and at the same rate, is that it will free up your credit faster. Within 10 months, you’re going to have Card A paid off entirely. Whereas if you divided your extra money between all cards ($10 per card), Card A would take almost 17 months to pay off. And the sooner you pay off Card A, the sooner you have an extra $50 a month to throw at Card B.
You can decide on the order of the cards based on the balance, from smallest to largest (the Snowball Method), or on the interest rate, from largest to smallest (known as the Avalanche Method).
tl;dr: SNOWBALL YOUR DEBT PAYMENTS.
We wrote more about it here:
Hi bitches!!! I have a credit question for you. Say I have six cards that are maxed out ranging from $500-$2000 on each and a score of…520. Should I pay off the smaller ones first in full or the same amount across all of them (say $150/week) to get the quickest score increase? I’m applying for an apartment soon and need better credit! Although I’ve never ever missed a payment so Idk if that helps for the apartment??? Please and thank you!!
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EmotionalGay94 