Yes, it’s that time of year again. Time for New Year’s Resolutions. Among the favorites for most people are resolutions for improving their Health & Wealth. This article is the second of a series in which we will suggest some financial resolutions that you can use to make the New Year the brightest ever.

Among all the actions you could take to improve your finances, paying down credit card debt ranks as one of the most important. Not only does the high interest make your original purchase very expensive, the payment requirements take away money that cold otherwise be used for savings or investments.

Although it’s possible that your card had a manageable interest rate last year, virtually all credit card issuers have increased the rates they are charging across the board … without regard to your personal credit report. In some cases, rates have more than doubled.

Any extra payments you can make towards this debt will have the effect of earning an equivalent rate of return. For example, if your card charges 24% interest, paying off that balance will save you the 24% that you had been paying. When compared with interest that you can earn today, he numbers aren’t even close.

Of course, along with paying off your credit card debt is the caveat that you are not using them to make new charges at the same time. That would have the same effect as pouring water into a bucket that was full of holes. You must go on a financial diet until the debit is gone. The freedom you will feel when that day comes will be worth it.

So, what approach is best for paying down debt? Traditionally, the recommendation has been to pay down the card with the highest interest rate first. This will certainly have the biggest impact. However, in recent years others have introduced the “Snowball” plan where the card with the smallest balance is paid first, then the next smallest, and so forth. The goal of this plan is to give you small victories as you progress so that you can see the results and keep up your determination.

I would suggest that the best approach is a bit of a combination of these two approaches. First, pay off the smallest balance so you do get a bit of a boost as you see that the plan is working. Once the first card is paid off, then immediately switch to paying the card with the highest interest rate. Overall, this will keep you motivated to continue while providing the greatest benefit for your finances.

Here are the specific steps for attacking your credit card debt:

    1. Create a list of your debts, including the balance, interest rate, and monthly minimum payment amount.
    2. Always make your payments on time. Adding late fees will only work against you. It will also hurt your credit rating. Remember: card issuers continually check your credit and can change your interest rate if they think you are a high risk.
    3. Call each of the companies and negotiate for a lower interest rate. Your goal is a permanent reduction, but even a temporary cut in the rate will be helpful.
    4. Schedule the minimum payment on each of the cards except the one you have determined to pay off first. Pull together as much extra money as your budget will allow to add to your payments on this card.
    5. After the first card is paid off, take the amount you had been paying on that card and add it to the minimum payment you had been paying on the next card. Your total monthly payments will be the same, but you are now directing a larger amount toward this credit card and so it will accelerate the process.
    6. Repeat Step #5 as many times as necessary to pay off each one of your credit cards.

Track your progress by updating the list you created in Step #1. Although you won’t notice any major changes in the first couple of months, it won’t be long before you see that your balances are headed in the right direction.

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If you would like more strategies and action steps for improving your finances, continue reading this series of articles at You can also gain access to a FREE copy of to my Five Tips for Creating Wealth report when you subscribe to my free email course.