Consumer Alert: Tackling Debt – Snowball vs Avalanche Method vs Personal Loans
The Federal Reserve Bank of St. Louis recently published a shocking analysis of American debt, revealing that the average U.S. household with credit card debt carries a balance of around $7,226. With the average credit card interest rate currently at 27.65 percent, Americans are paying over $165 a month in interest alone. This has sparked a consumer alert on the importance of paying off credit card debt to achieve financial health.
Personal finance experts suggest two primary methods for paying off debt: the snowball method and the avalanche method. The snowball method involves listing debts from smallest to largest and paying off the smallest debt first, then rolling that payment over to the next debt on the list. The avalanche method, on the other hand, prioritizes paying off debts with the highest interest rates first.
Jarrett Felton, a personal finance expert, recommends considering a third option: taking out a personal loan to pay off credit card debt. Personal loans are amortized over a period of time with fixed payments, often at lower interest rates than credit cards. However, it’s important to note that personal loans may come with high fees and strict requirements, especially for those with poor credit.
Regardless of the method chosen, Felton emphasizes the importance of commitment in paying off debt. By taking proactive steps to address credit card debt, individuals can work towards achieving financial stability and freedom.
