Paying the highest balance first and using the snowball method, which involves paying off the smallest balances first, are good ways to pay off credit card debt, according to Bankrate. Other recommended methods include doing a balance transfer and using savings to reduce debts.Continue Reading
Debt reduction techniques are effective in paying off credit card balances if a person stays dedicated to his financial goals, notes Bankrate. The snowball method focuses on changing an individual's payment behavior and aims to motivate borrowers to pay debts regularly. Even when using the snowball method, people should pay off bigger debts before smaller ones if the larger balances are IRS debts or if they want to stop a foreclosure.
Another strategy for paying off credit card debt is to prioritize paying bills with the highest interest rates, particularly if the account uses more than 30 percent of the credit line, recommends Bankrate. This method helps increase a person's credit score, because lower debt utilization leads to a better score.
Before making a balance transfer, a debtor should first make sure the low interest rate offsets the transfer charges, states Bankrate. For very large debts, it may help to use some savings from an emergency fund and then create a new emergency fund after paying off bills. It is important to have an emergency fund usable for three to six months to prepare for unexpected expenses.Learn more about Credit & Lending