How to clear your credit cards

'Snowballing' is an incredibly effective way to clear debts much more quickly than if you only make minimum repayments each month.

How does snowballing work?

The idea is that you:

• single out your most expensive credit card debt, i.e. the one with the highest interest rate
• throw as much money as you can at paying this off
• keep up minimum repayments on the rest.

Once you have paid off your most expensive credit card you move on to the next most expensive debt. Put the extra money you now have freed up to clear that as quickly as possible, and so on until you are debt-free.

Snowballing your credit card debt may be a worthwhile course of action if you have outstanding balances on several credit cards, each with a different interest rate and a different amount to clear.

For example, you might have three credit cards, with outstanding balances of £500, £1,500, and £2,000. These might have respective APRs of 15%, 23%, and 9%. Using the snowballing method you would begin by focusing your efforts on the card with an APR of 23%, as this is costing you the most. While keeping up minimum repayments on all three, channel as much spare money as you can towards the 23% APR debt until it is paid off.

You'll now have the minimum repayment plus the extra you were paying towards the 23% APR debt freed up and can put it towards the 15% APR debt until that is also paid off. Finally, you'll then have plenty of money freed up to be able to eradicate the 9% APR debt relatively easily.