Heavenly Homemakers

This post is written by Craig Ford, writer at Money Help for Christians.

The average American family has too much credit card debt. According to results posted by Visual Economics, the average American family makes $43,000 per year and owes $2,200 in credit card debt. Since not everyone even has credit card debt, that means those who do typically have debts in excess of a couple thousand dollars.

If you are currently working on getting out of credit card debt, here are three effective strategies to consider. 

#1. Pay Off Highest Interest Debts First

This is the oldest approach to debt repayment. It is, in fact, the approach that makes the most mathematical sense. Simply make a list of all your debts, and then start to pay off the debts that cost you the most (determined by interest rates).

Thus, you would pay off the 17% Capital One card before the 15% American Express card. Last of all, you’d pay off the 10% credit union card.

In the long run, this method saves you the most money, and theoretically, helps you get out of debt the fastest. But life and debt repayment are about a lot more than money. However, when you look closely at credit card consolidation and balance transfers, you realize that math is not the heart of the debt issue. 

#2. The Debt Snowball

If you’ve heard of the debt snowball, it is likely because Dave Ramsey promotes the debt snowball.

With the debt snowball, you list your debt by amount owing instead of by interest rates.

Imagine you owed $9,000 on a Capital One card, $5,000 on an American Express account, and $2,000 on a card from your credit union.

In this case, you would pay off your cards in the following order – credit union, American Express, and Capital One. You would continue to make minimum payments on all the other debts until you pay off one debt. You would then shift your focus to the next debt. 

One of the biggest advantages to the debt snowball is that it provides the quickest emotional pay off. Instead of waiting until you pay off $9,000 in debt (as you would with the highest interest), you get to do the happy dance after paying off the $2,000 credit union bill. That emotional energy will fuel your continued fight out of debt.

If you are interested in the debt snowball, you might check out this free debt snowball spreadsheet.

#3. Emotional Debts are the First to Go

The fact is sometimes we make poor choices. Choices that haunt us. Let’s say you once helped buy a $1,000 stereo for an old boyfriend. That relationship never worked out, but you still have that $1,000 credit card debt. Imagine how good it would feel to finally pay off that debt and move on. 

This debt repayment strategy encourages you to list your debt in order of how passionate you are to pay them off. Perhaps one credit card company has been especially rude in their interactions. Put them first, and get them out of your life. 

Again, this is a strategy that relies on emotions more than math.

Which is the best strategy?

The answer completely depends on your temperament. 

I, for example, could effectively use #1 and #3 in conjunction. The reason? I hate paying interest to banks so the debt with the highest interest rate would also be the one with the most emotional pay off attached to it. 

Yet, there is no denying that many, many people are following the debt snowball with amazing results. Either way, if you have credit card debt, be sure you have a game plan or steps to get out of debt and work aggressively towards whatever strategy you adopt.

What strategy do you use / do you recommend to help people get out of debt?

 Be sure to visit Money Help for Christians where Craig promotes a frugal, simple, debt-free, and generous lifestyle so Christians can faithfully maximize their resources by putting them at the disposal of God’s Kingdom.