Ah, debt…it’s the pits. When you’re paying down debt, it can feel like such a battle. A good strategy can make paying off your credit cars easier and also help you hit your financial goals faster.

Like everything in personal finance, there’s no right answer for how to pay down debt, but there are two good strategies. Which one is right for you? It depends on your psychology and what keeps you motivated. You may be juiced up by quick wins (like me!) or you may get a thrill knowing you’re paying as little interest as possible. We’ll discuss both strategies in detail below.

Key Takeaways

  • Always pay your minimum balances to protect your credit score.
  • Choose a strategy that works for you to pay down the debt (more than the minimum) and stick to it. 
  • Think of mortgages and student loans as necessary evils, rather than good debt – keep them modest and make additional payments when you can. 

Golden Rule: Pay Your Minimum Balances

Regardless of which you choose, it’s important to make your minimum payments while tackling a specific account balance. It keeps your debt from expanding, and protects your credit score. Unless you are in a crisis and need to go into forbearance, always make that minimum payment. Set it up on autodraft for the day after you get paid. 

Two Strategies for Paying off credit cards

  • The Avalanche Method is for you optimizers out there. In this strategy, you focus on the debt with the highest interest rate account. For instance, if one credit card has an 18% APR and another one has 14%, tackle the balance on the 18% credit card first. In doing so, you pay less money overall on your march to debt victory, because you pay less interest. 
  • The Snowball Method is better if you like a quick win. Here, you focus on the accounts with the smallest balance, regardless of their interest rate. If one credit card has a $2,500 balance and another has a $4,000 balance, focus on paying down the $2,500 first. ou get to feel the glow of retiring that debt, and it might help motivate you the tackle the bigger balances.

Remember – in both cases, keep making that minimum payment. Even if you tackle a balance $10 at a time, each check is progress and ensures a little more of all the following minimum payments go towards the balance instead of interest. 

The Avalanche Method To Pay off Debt – Pros And Cons

Personal finance experts love the Avalanche, because it is a real win against the credit card companies. They get as little of your money as possible while you tackle the debt. Whether this is the right strategy for you comes down to two things: are you comfortable putting off that sense of victory in exchange for knowing you optimized? For some people, that is a real buzz. Second, the Avalanche is a lot easier if your debts are all roughly about the same size. If one balance that’s $40,000 and another one is $2,000, you need a Will of Steel to chip away at the big one, while the little one just hangs out. 

Personally, I have never been able to get the Avalanche method to work for me. We do not carry credit card debt any more (sorry, banks!), but when I was younger and had a problematic relationship with my credit cards, I needed the quick win of the Snowball. 

The Snowball Method To Pay off Debt – Flossie’s Preference 

In reality, the month to month grind of paying down debt, can be demoralizing. So, here at Flossie we strongly prefer the Snowball Method. Hitting your smallest balances first gives you both a more immediate sense of victory and fewer bills to manage. If you’re having trouble staying motivated on your financial goals, the Snowball Method is the right approach for you. However, if you have very high interest rate debt, such as a payday loan, tackle that first even if they’re bigger. The risk is too high but they can get away from you, and the downsides are severe. 

What Is The Best Method To Pay off Debt?

Ultimately, it depends on you. The most important thing is that you stick with it – it can be hard to dig out from under credit card. Focus on maintaining your motivation: remind yourself of your goals and get support. You can join a debt team on the Flossie community. It feels good to share your victories, even if that victory is “Made my minimum payments this month, plus twenty bucks to the balance.” You don’t have to battle the debt dragon alone. 

Don’t forget to treat yourself a little bit as you meet your financial goals. Getting a balance to zero is a great place moment for a little reward  just don’t charge it!).

Is There Such A Thing As Good Debt?

Your approach to debt management is as complex as your psychology and your personal situation,. If you’re comfortable carrying some debt, mortgages and student loans with low interest rates (under 4%) are not inherently harmful. We carry mortgages and stay in touch with our mortgage broker on rates. 

I have also argued there is no such thing as “good debt”. Student loans can dog you for years, and are stressful when you’re in your 40s or planning your kids’ education. Mortgages are enforced savings more than an investment – it’s hard to make a lot of money on your primary residence, after paying inflation and interest rates. 

If you’re fighting the good fight against credit card debt, check out our pro tips on defeating debt.

Join the AskFlossie community where all women are empowered with community and knowledge to build stronger financial lives. We’re here to be your financial wingwoman!