Try This High-Interest Debt Repayment Strategy

According to a recent report, the average American household has $6,100 in credit card debt. That’s bad news because credit cards typically have very high interest rates. If you’re someone who is carrying the weight of that debt, let’s create a plan to pay it off. Here are some steps to take to pay down that high-interest debt.

Find Your Baseline

Before starting any goal, you need to establish two points. The end goal and your starting point or baseline. This gives you a way to gauge your progress.

Total Your Debt. Like any other goal, the first step toward paying down your debt is to know exactly how much you owe. You can do this by doing the following:

• Contact each of your lenders and ask for your current balance.
• Check your monthly statements or log in online to get your total credit used.
• Add up the total credit card debts so you know the starting point. 

Check Your Budget

Now that you know your goal, or total outstanding balance, the next step is to review your budget. Looking through your budget helps you find areas to cut and reallocate to your debt goal.

• Carefully go through your monthly spending.
• See if you can find things you’re spending money on that you’re not using, like subscriptions or gym memberships.
• Look for things you can do without for a while, like entertainment or travel.
• Once you have a number, move that extra money to pay down your debt.

Pick Your Strategy

It’s time now to pick a debt payment strategy. The two most popular methods are the snowball method and the avalanche method.

• Snowball Method. With the snowball method, you pay off the smallest credit card debt first, then proceed to pay off the next smallest debt, and so on.
• Avalanche Method. With the avalanche method, you pay down the credit card with the highest interest rate first. Then pay off your next highest rate card, and so on. This is typically how you want to go when dealing with high-interest debt.

However, it’s not so important which strategy you choose. What is important is picking a strategy that you will stick with.

Do One Thing: Try paying down debt using the avalanche method, which saves you money in the long run.