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How to Make a Credit Card Paydown Plan from Debt 101

Most of us have relied on credit cards more than we should sometimes, and that can lead us down the road of only being able to afford minimum payments, which leads to growing debt and hefty interest fines. Eventually, you start to wonder how you’re ever going to pay it all off. In this special selection from DEBT 101, author and certified public accountant Michelle Cagan shares advice on how to create a credit card paydown plan.

When you’re ready to start paying down your debt, make a plan that you can stick to. The best plans involve focusing on one debt at a time (your “focus” debt). When you zero in on a single debt, it’s easier to make and see progress. Plus, it’s much less stressful to face a molehill than a mountain.

The two most popular paydown plans are the snowball method and the avalanche method. Either will help you dig your way out of debt, so choose whichever feels more comfortable for you. Avalanche normally works a little bit faster and saves you a little more interest. But it’s usually easier for people to stick with the snowball method because there are more victories early on.

Both methods work well, and you don’t have to lock yourself in; you can switch between them whenever you want. The trick for success here is to pick the one you think will be easier to start with, and then get started.

Debt 101 book cover

No Matter Which Plan You Choose

Whichever method you go for, make sure to do these four things:

  1. Pick one focus debt that you’ll put extra money toward
  2. Throw every dollar you can at that focus debt
  3. Make multiple payments throughout the month (rather than one on the due date) to minimize the next month’s interest charge
  4. Make on-time minimum payments every month on every debt

That last point is important. Any skipped or late payments will be hit with expensive penalties that take your debt in the wrong direction and make it even harder to pay down. Avoid even the possibility of late payments by setting up automatic payments to cover the minimum for every credit card, including the focus debt.

There is a fifth thing to do, but this one can be extra tough: Stop using your credit cards except for actual emergencies. It’s practically impossible to pay credit card debt off if you’re adding new charges every month.

The Avalanche Method

With the avalanche method, you’ll rank your credit card debts by interest rate, from highest to lowest, and focus on the most expensive debt first. Regardless of how big that debt is, you’ll save money in interest, which leaves more money for paying down the balance.

You can find your current credit card interest rates (sometimes listed as APR) right on the statements. Pick the card with the highest rate, and start paying that one down as fast as you can. Once it’s paid off, you’ll move to the next highest rate, and keep going until all of the cards are paid off.

The Snowball Method

If you like extra encouragement and motivation, the snowball method may work well for you. Using this plan, you’ll pay down your first focus debt more quickly, and get a sense of accomplishment as you cross it off the list. You’ll be able to clearly see your progress, and that little rush (it’s true; it’s science) will help keep the paydown practice going.

With this method, you’ll list your debt in order of balance, from lowest to highest. Your smallest debt will be your first focus debt. Once that one’s settled, you’ll use the money you’d been putting toward it to pay the next debt on your list (your payments will “snowball”). You’ll keep paying off debts and moving down the list until all of the debts are paid off.


Whichever paydown plan you use, you can sprinkle it with snowflakes any time. Snowflakes are found money you can use to make extra payments on your focus debt. They include things like birthday checks from Grandma, tax refunds, and yard sale proceeds, and can help you pay your debt down even faster.

For a deeper understanding of debt, how to get out of it, and how to use it to your advantage, pick up a copy of DEBT 101 by Michele Cagan, CPA.

If you enjoyed this article, you may also like: 5 Things I Learned from Gaby Dunn’s Bad with Money.

Excerpted from DEBT 101 by Michele Cagan, CPACopyright © 2020 by Simon & Schuster, Inc. Used by permission of the publisher. All rights reserved.

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