Credit cards are a great way of bridging the gap between one pay cheque and another and for use in emergencies, but they are easy to lose control of if you’re not careful. This guide will show you how to break the credit card rules and pay them off as quickly and cheaply as possible using a method known as snowballing!
Step 1
Stop spending on your credit cards altogether, and cut all other spending to only what you need – not what you want!
Step 2
Look up the outstanding creditcard balance, minimum monthly repayment and apr of each of your credit/store cards. You can usually find all this information in your monthly statement, or on the card company’s website if you bank online.
Step 3
Write these up in a list in order of their APR, highest to lowest.
| Card Name | APR % | Outstanding Balance | Min. Monthly repayment |
| A Store Card | 22.5 | 1500.00 | 75.00 |
| A Credit Card | 19.9 | 450.00 | 20.25 |
| Another Credit Card | 15.7 | 800.00 | 44.00 |
Step 4
Decide how much of your debt you can afford to repay each month.
Step 5
Add the minimum payment amount of all your cards apart from the first in the list together, then subtract this from the amount you decided on in step 3. Allocate this amount to your most expensive card, the rest will cover the minimum payments on your other cards.
It’s a good idea to set up direct debits to make sure these are paid every month as late payment charges won’t help your situation!
Step 6
Continue this payment plan until the first card on your list is paid off, then cancel that card and repeat the process again.
As you move through you cards you’ll find that the debt is paid off more quickly as the amount you repay on the worst offending card increases while the amount of interest being added decreases. Continue doing this until all your cards are cleared!
Tips
- It’s almost always cheaper to snowball your credit card debts rather than use a consolidation loan in the long run.
- To avoid future credit card debt only spend what you can afford to pay back each month, and use your credit card only when it’s useful; for example, extra protection when buying higher value items.
- Limit yourself to one or two cards only.
- Ask your credit card company/ credit issuers to reduce your credit limit to the amount you can afford to repay in full each month.
- Never use credit card cheques or cash advances as interest is charged on these from day one.
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