3 Methods for Paying Off Your Credit Card

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When you need help with credit card debt, you might not be sure where to start. You have the money to start paying off your credit card balances, but is there a certain strategy to try over another? What is the most effective way to pay off your debt? How can you follow progress? Here are some popular ways to start paying off debt with your extra money, in addition to pros and cons to consider.


Avalanche Method

The avalanche method is quite simple. You pay down the account with the highest interest rate first. You can use a credit card interest calculator to determine how much you will save if you first pay off your highest-interest loan.

For example, you might have a credit card with upwards of 22% APR. Once you have paid off that debt, you can work on other accounts. This could be other credit cards, or it could be student loans, a mortgage, or car loans. This method will save you the most money over the long term. However, if you have a high balance on the account, it could take a while to pay off compared to other, smaller accounts, which could affect your motivation to pay it off. But if you stay consistent, you’ll eventually achieve your goal and have the biggest balance out of the way.

 Snowball Method

Another popular method is the snowball method. With this method, you first pay down the account with the lowest balance. Much as a snowball rolling downhill gets bigger, the goal here is to have more and more money to pay off all of your accounts. You pay the lowest balance debt account with any extra money you have until it’s paid off, then use the minimum payment and extra money from that account to start paying off the next debt.

The snowball method allows you to see progress quickly, helping you gain momentum and keeping your motivation high. It can also help make paying off debt seem less overwhelming. However, you will likely pay more interest in the long run with the snowball method. This is because your higher balance card will sit there accruing more interest as you pay off the first. While it works for some, it might not be for everyone.

 Consolidate and Manage Your Balances in One Payment

Using a credit card debt calculator might tell you that consolidating your credit card balances is for you. There are two types to consider. One option simply combines your existing accounts into one loan with a single monthly payment, likely with a lower APR. However, some companies might require you to close your existing cards.

The other method is not technically consolidation but has a similar idea. Working with a credit card management company can provide you with a personal line of credit that pays off your accounts. You then have one payment to make to the card management company. This is often done at a lower interest rate and you would likely still have access to your accounts. Unlike the other two methods, you will likely have to qualify for a loan.

About Tally

 Tally believes that being debt-free should be attainable for everyone. The financial playing field is intentionally complex, and the Tally app was created to level it. Qualifying users can consolidate their credit card balances with Tally, helping them be better off financially to plan for the future. Unlike other financial brands, Tally tries to forge personal bonds with people. This helps Tally to better help and support its customers. It only takes a few minutes to get started with the Tally app. When you need help with financial matters, turn to Tally.

 See how Tally can help you with credit card debt at https://www.meettally.com/

 Disclosures: Lines of credit issued by Cross River Bank, Member FDIC, or by Tally Technologies, Inc. (“Tally”), NMLS #1492782 (http://nmlsconsumeraccess.org); see your line of credit agreement. Lines of credit not available in all states.

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