Financial Fitness > Tackle Overspending > Minimize Credit Card Debt
Each month that you carry over a balance on your credit cards, you will owe what you charged plus interest. To maintain control of this debt, always try to pay more than the minimum if you can't pay the balance in full. If you have debt on more than one card, use the roll-down method to tackle it efficiently.
Do you think it's a good idea to tackle the smallest debt first? Think again. Paying the smallest debt first can allow your debt to snowball because larger debts can accumulate tons of interest! When you have multiple debts, it is usually advantageous to use the roll-down method instead of the debt-snowball method. By focusing all your extra cash on the highest interest balance, while paying the minimums on other balances, you can potentially save yourself hundreds of dollars.
Use this calculator to create a roll-down plan for you.
Sample Case — Jane Q. StudentIn the following scenario, Jane has three credit cards and a total debt of $1,600. The three cards are:
The total monthly payment Jane owes to all three cards is $52. Jane commits to adding more funds ($30) to her total monthly payment. She then applies this additional amount to card with highest interest, in this case the Target card. Once the balance on the high interest card is paid in full, she continues to pay $82 per month, but rolls the amount down to card with next highest interest rate. By applying the roll-down method, Jane eliminates her debt in just about two years.
By comparison, if Jane had paid the minimum payment to each card each month, the $1,600 debt would have taken over six years to eliminate: