When it comes to credit card debt, one popular method to pay it off is known as the snowball method. It's pushed by many people, including financial advisor Dave Ramsey. However, some people warn that it could actually cause you to pay far more.
The premise behind the snowball method is simply that you feel good about closing an account. So, if you have multiple debts, it's best to pick the one that is the smallest and start there. Once it's paid off, you'll feel great and you'll be motivated to take on the next. When it's paid off, you can then move on toward the largest one.
This can work, but the problem comes when you have different interest rates. If the rates on that largest debt are the highest ones you have, letting that debt sit for the longest time means you're racking up the most possible interest debt. Even when making the minimum payments, that total just gets higher every month, and you're doing nothing about it.
So, while paying off the smaller debts may feel good, is it really worth it if those interest rates were also pretty low? You're essentially paying extra money every month in order to feel good about your progress. While this can eventually get you out of debt, it could take longer than it needs to as your debt grows constantly. Focusing on the account with the highest interest rate first may not give you the same good feelings of accomplishment, but it could be more effective financially.
When facing a lot of credit card debt in Pennsylvania, you definitely want to carefully consider all of your options. A bankruptcy attorney may be able to help you with that.
Source: Nerd Wallet, "Got Debt? Don’t Listen to Dave Ramsey," Anisha Sekar, accessed April 14, 2016