Debt Be Gone: My Debt Repayment Plan

Sitting down and creating our first budget was stressful. This was mainly because we had to sit down and make a plan on how we were going to pay off the debt on our credit cards and line of credit. There were two debt repayment methods that I learned about: the debt snowball method and the debt avalanche method.

The Debt Snowball Method: the process of paying off your smallest debt first, regardless of the interest rate. This works best if seeing your debt gives you high anxiety.
The Debt Avalanche Method: the process of paying off debt with the highest interest rate first. This method helps you save the most money while you’re paying down your debt.

So…I’m sure you’re probably saying, yeah, yeah, yeah, I’ve read about this before, which method did YOU use? Well….I used the Debt Avalanche Method and here’s why. Below is a chart of how much interest I was paying each month on each card/ account.

Card Type	Account Amount	Interest	Minimum Payment
VISA	$8700	19.99%	$168
VISA	$3300	19.00%	$224
Line of Credit	$4100	8%	$30

Rough Estimations of my debt- July 2017

By the time I added up all the numbers, I was almost paying $400 alone in minimum payments every month. This was NOT okay. You know what I could have done with that money if I had no debt? A vacation on a sweet, sweet Caribbean island. Sorry, let me refocus here lol (just thinking about that debt still burns me inside).

So we budgeted to pay at least the minimum payment on each debt account and then we would put extra on the card that had the highest interest rate and balance. This helped to reduce the interest overtime on that card. But to be honest….that method wasn’t enough. There was one more thing we used to help pay down our cards….A promotional interest rate on another credit card.

I know, I know, you are not supposed to use one card to pay down another, so I tread lightly when I make this suggestion, because if you use this method you have to be very disciplined on paying off your debt. What I’m about to say most, if not all financial advisors, will shun against this….

We applied for another credit to help manage the interest we were paying each month. Specifically the MBNA Platinum Card that has a promotional balance transfer interest rate of 0%. Doing this helped us put more money on paying down the debt instead of the money going to high interest payments. (Disclaimer: I am NOT a financial adviser.This was a risk I took, after some research, in order to make traction on paying off our debt. This method may not be an option for you based on your current credit score. My credit score was high enough that I was approved for the card. I suggest doing your research and talking about options with a financial advisor to see what type of debt consolidation would work best for you.)

Review on my debt repayment method:

Chose a repayment method that I felt most comfortable with.
Stopped using the credit cards I was trying to pay off. (this is key!)
Paid cash/debit for all purchases during this repayment time
Used the benefits of a credit card promotional interest offer

Lesson learned: The interest on your credit card can make it difficult to pay off your debt. Look for ways to consolidate your debt at a lower interest rate to make it easier for you to pay off your debt. Call your bank and see if you can lower your interest rate on your credit card.

I’ll talk more about how to use a credit card to benefit you and not the bank and what your credit score really means in a future post.

Pay off that debt so you can “Level Up Your Wealth!”