Many Florida residents might think of skiing the Alps or scaling the top of Mount Everest when they hear words like snowballs and avalanches in the same sentence. Not many, however, would conjure up images of credit card debt. Yet, these things are connected in the financial world.
Many people in this state, as well as others in the nation, have significant credit card debt. Financial observers say this is often a sign of a booming economy, meaning people are making large purchases, which puts money into the economy. The problem is some of the people who are spending have no way to pay back their credit obligations.
That’s where avalanches and snowballs come in. In financial-speak, these words refer to styles of paying off debt. The snowball method focuses on the smallest debts first, paying the minimum on one at a time, and tackling the next larger debt each time a smaller one is paid off.
The avalanche method involves writing a list of highest interest rate debts to the lowest. Minimum payment on each is made every month, and any extra money goes to the debt with the highest interest rate. Knocking out interest is often the fastest way to pay off debt. As for the two methods, there’s no right or wrong approach; each person can choose the style that works best for him or her when credit card debt gets out of hand. Sometimes, the most viable option for immediate debt relief in serious financial crisis is to file for bankruptcy, in which case it often helps to consult with a Florida attorney.
Source: CNBC, “Americans owe $1 trillion in credit card debt – here are 2 proven strategies for paying it off“, Emmie Martin, April 14, 2017