Creating a sound game plan to pay off your credit card balances is important. If you procrastinate, you could miss payments, which can result in your credit-utilization ratio increasing. Paying off your debt can take a long time, and you don't want to sacrifice your credit score during this process either. But if you decide on a good payoff strategy, you could see these balances vanishing in no time. Here are a few payment strategies you can try:
This strategy involves paying off your accounts starting from the smallest balance and then moving to the largest one. You should continue to pay the minimum for your other accounts, but for the smaller one, make a payment that is a little larger than your minimum until it is done. Once that account has been dealt with, proceed to the next one. This strategy can be fulfilling, as you can take care of one debt quickly and lower your credit-utilization ratio in the process. The one drawback is that if your larger accounts have higher interest rates and you don't deal with those debts right away, you could have trouble paying for those accounts later on.
Interest rates can be a major problem when trying to pay off your debt. If you had a bad credit score when you were applying for any of your current cards, you probably got a high rate and are feeling the effects of expensive interest charges each month. One of the most common payment plans is dealing with the accounts with the higher interest rates first. The rationale is that once you tackle these debts, you won't have to worry about those expensive fees every month. Even if your largest balance has high interest, don't get discouraged by how long it takes. The hard work you are putting in will show results over time. If you can, refinance your higher-interest accounts for easier payments.
Biggest impact method
Simply put, this method is paying off the account with the highest monthly payment first. For instance, if you have two accounts, and one minimum payment is $90 and the other is $150, pay the $150 account. This method could be a bit more difficult if you are living on a tight budget, but you will feel satisfaction once everything is done.