With consumer debt at unprecedented levels in the United States, major credit card issuers reporting more late and delinquent accounts than they've seen in years and the prices of necessities creeping upward, many consumers are looking for a solution.
Different resources recommend different ways of attacking the debt monster. Here, we'll outline two popular methods of eliminating credit card debt and help you figure out which is likely to work for you.
Before you decide which method to use, you need to make a serious commitment to eliminating your debt. That means making debt elimination your top priority. Most people benefit from creating a budget to purge the unnecessary spending from their lives so there's enough money to put toward credit card (or other) bills.
Keep in mind, too, that your rent or mortgage payments should take priority each month. If your home goes into foreclosure or you get evicted, your debt problems will only be compounded.
Once you're committed to paying off debt, why not see if you can save yourself some time and money? Call each of your creditors to address two issues before beginning your debt snowball or credit crunch:
Good if you: need regular encouragement to stay motivated; would rather pay fewer bills each month; want to start seeing results quickly.
This method is known as a "snowball" because the process speeds up as you pay off debts, much like a snowball rolling down a hill. Snowballing can be psychologically rewarding because starting with the smallest debt allows you to see success quickly, which can be a strong motivator to keep at it.
Good if you: are so pumped up about eliminating debt you don't need any more encouragement; want to pay the least possible amount of money; don't mind waiting for results.
In many cases, this method ends up being somewhat less expensive than the debt snowball, but it can be more difficult to maintain. Because you won't necessarily start with your smallest bill, you may not see a debt eliminated for several months, which can be frustrating. But if you don't mind juggling several payments each month, this may be the best method for you.
If you aren't sure which method would best suit your debts, consider consulting with a credit counseling agency< for advice on your finances.