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Using the snowball method to pay off debts

A study that will be published in the Journal of Marketing Research reveals that tackling small goals may make it easier to pay down large amounts of debt. However, starting with smaller balances may not be the best plan for all New Jersey borrowers. This is because paying off debts with higher interest rates may enable a consumer to pay off the debt balance sooner and reduces the amount of interest that will have to be paid overall.

Those who pay down a small balance may also lull themselves into the false sense that they can start spending again. For those who insist on paying off small balances first, it may be better to cut up the card after the balance is paid off to ensure that it isn't used again in the future. In some cases, it may be best to close the account even if it results in a temporary dip in a person's credit score.

While researchers say that there is no right answer when it comes to paying down credit card debt, it is generally better to order repayment by interest rate rather than debt balance. Borrowers may be aided by transferring a current balance to another card offering a zero percent interest rate for a certain number of months. However, it is only beneficial if the balance is paid off before the promotional period ends.

Those who are struggling with credit card debt may wish to consider filing for bankruptcy as a possible form of debt relief. After filing, a judge will issue a stay against creditors, which will put an end to letters and phone calls regarding current debt balances. An attorney may be able to explain these benefits and other reasons why bankruptcy may be a good financial decision.

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