How to pay down multiple credit card balances
You have several credit cards with unpaid balances, and it seems like you’ll never be able to pay them off. Sound familiar?
A recent study in the Harvard Business Review found a way to pay that increases your chances of success.
Study co-author Remi Trudel, assistant professor of marketing at Boston University, says focus on one credit card at a time – starting with the lowest balance. He gave an example of someone with numerous cards and $15,000 in total debt.
“The idea of paying down $15,000 can seem insurmountable, whereas if you look at each individual account, if you have a smaller account of $500 or a thousand dollars, that seems much more attainable,” he said. “So in essence you're much more motivated and encouraged by seeing progress toward closing off one of those smaller accounts."
His advice based on this study: Pay the minimum on all of your accounts every month. Then put the rest of what you can afford on your smallest account. Once that one is paid off, move to your next larger account and so on.
Focusing on sub-goals, one card at a time, Trudel said, tends to be more motivating.