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May 17, 2009

Debt Stacking

If you are making monthly payments on several different credit cards I can help you prioritize your efforts in seven simple steps:

1) Collect all of the monthly statements you can track down.
2) Organize the statements by placing them in separate piles based on the card issuer.
3) Organize each pile in descending order based on the month. (The current month should be on top.)
4) Paperclip or rubber band each individual stack.
5) Place the stacks in a single descending order pile based on the of the Annual Percentage Rate (APR) of each individual stack. (Highest APR on should be top.)
6) You have just created your debt stack. If you pay more than the minimum monthly payment on your credit cards you should stop doing so. That's right, reduce the monthly payment on each card to the minimum and then apply the difference to the payment made to the card that is on top of your debt stack. If you are currently only making the minimum payments on all of your bills then you should focus all of the extra money you can afford to spend on the card that is on top of your debt stack.
7) Once the card that is on top is paid off apply the payment you were making to the card to the next one in your debt stack.

This approach will help your prioritize your payments and accelerate the payoff of your debts.
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1 comment:

Mr. Charles debt guide said...

nice way in breaking down how to use debt stacking.

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