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Debt Psychology 101: Paying off smallest debts first provides incentive

January 4, 2012
By Karen Lawson

Washington Post financial columnist Michelle Singletary encourages consumers to try a new method for paying off credit card debt. Financial counselors frequently recommend paying off your highest APR debt first, but Singletary suggests her “Debt Dash” method may work better.

Singletary cites the benefits of cleaning up small debts first as a means of providing yourself with encouragement through the benefit of reducing debts owed. This idea not only supplies debtors with a concrete plan for paying off credit card debt, but also provides quick and visible results.  Seeing progress in any debt repayment program is important for avoiding temptation and falling back into using credit cards.

Debt solutions 2012:  DIY or finding the help you need

New year’s resolutions can be quickly forgotten, but paying off credit card debt can save hundreds of dollars in interest and other charges each year. Get started on your debt reduction plan by listing all of your credit card account balances, their annual percentage rates, minimum payment amounts and payment due dates. Pay off any small debts immediately. You may choose to pay off the next largest balance in ascending order until all balances are paid off, or you can also attack the highest APR debt  after paying off small balance credit card debt. Contacting a consumer credit counseling and debt consolidation program may be the best solution if you are overwhelmed with debt or unsure of how much and who you owe.  These programs, are typically run by certified credit counselors who review your finances and negotiate affordable repayment terms with your creditors. You make one monthly payment to your credit counseling service, and they disburse funds to your creditors according to your repayment agreement. Whether you attack credit card debt on your own or work with a professional debt relief company, start saving on high cost credit card debt by paying it off in 2012.

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