“I want more than anything to be done with these payments and to not have to rely on credit cards moving forward.”: Struggling with overwhelming credit card debt. Should I stick with the Avalanche method or consider other options?

Hi Money Minder,

Getting a grip on our budget showed me just how overwhelming it is going to be to tackle our credit card debt. I really want to kiss these payments goodbye and not have to rely on credit cards anymore.

I did some research and it seems like the Avalanche Method is the most sensible option mathematically. Starting with the highest APR and working down from there sounds like a plan. Our total debt is $9,113.77 spread across five credit cards.

Here are the APRs:
– CC1: 30% ($830)
– CC2: 29.24% ($885.42)
– CC3: 27.24% ($705.49)
– CC4: 17.24% ($112.37)
– CC5: 0% for 15 months ($6,580.49)

The biggest balance was from a balance transfer to manage the debts before the interest rates spiked. Unfortunately, unexpected family emergencies caused the balances on the other cards to creep up. It’s frustrating!

Now that we’re here, should we stick with the Avalanche Method? What’s the best approach to pay off these debts? I considered a debt consolidation loan, but the interest rates are sky-high. It feels like a temporary fix to a big problem. I tried a credit union for better rates but got turned down.

No judgments here, just looking for guidance to get a handle on this. We want to save money instead of pouring it all into these credit cards.

Thanks for your help,
Financially Frustrated

Response from THE MONEY MINDER:

Hello There,

While it must have been a challenging realization to take control of budgeting and face the daunting task of managing credit card debt, it’s commendable that you are looking for practical solutions. The Avalanche Method, which involves paying off the highest APR debt first, is indeed one of the most mathematically sound strategies to tackle your situation. With a total debt of $9,113.77 spread across five credit cards, identifying the APRs and balances is crucial for your repayment plan.

Given the APRs you provided, starting with CC1 at 30% variable APR with a balance of $830, followed by CC2 at 29.24% with a balance of $885.42, and so forth, aligns with the Avalanche Method. This method allows you to focus on high-interest debt first, potentially saving you money in the long run.

It’s understandable that you considered a debt consolidation loan, but as you mentioned, the high-interest rates may not be the most effective solution. While denied for better rates at a local credit union, you are taking the proactive step toward financial stability, which is commendable. Moving forward, creating a strict budget, cutting back on expenses, and allocating any extra funds toward paying down your credit card debt can help expedite the process.

Remember, the journey to financial freedom may not be easy, but with determination and a solid plan in place, you and your husband can work towards eliminating this debt and begin saving for your future. All the best from THE MONEY MINDER.