The Worst and Best Ways to Destroy Debt

Do you feel buried by a mountain of debt?

Perhaps you have multiple credit card bills each month, with balances that are growing. Or, maybe a student loan obligation hounds you. And that car payment sure doesn’t help.

There are smart ways to dig your way out of debt. By contrast, pick the wrong way, and you’ll make a bad situation much worse, adding years and thousands of dollars to your burden.

Following are some of the worst ways to pay down debts — and tips on how to get the job done right.

The worst ways to pay off debt

There are some telltale signs that debt is getting the best of you. One is choosing to pay some bills and not pay others because there’s not enough money in your account.

Maxing out credit cards is another sign you have too much debt, as is using credit cards even though you swore you’d leave them in the sock drawer.

If any of these sound familiar, take some steps to pay down that debt. But don’t employ the worst possible strategies, such as:

  • Making minimum payments. While paying the minimum payment each month will keep the card companies happy, it’s a counterproductive way to pay off debt because you pay far too much in interest.
  • Pillaging your retirement plan. The money in retirement savings may be a tempting fix for current financial woes, but you’ll be short-changing yourself in the long run. Take the money out and it’s no longer being invested and growing for retirement. And, other than in a few limited circumstances, withdrawing the money early means you’ll pay not only taxes on it, but also penalties.
  • Paying off debt with the wrong loans. Don’t pay off debt with loans that carry exorbitant interest rates and fees. These include cash advances from credit cards and payday loans.

How to pay off debt the right way

The best way to pay off debt is to simply look your obligation square in the eye and use every cent you can to pay it down. One of the most effective ways to do this is called the debt snowball.

For example, let’s say you are trying to pay off credit card debt. Start by making a list of all debts. Order them from smallest to largest, or from highest interest rate to lowest rate.

Paying off the credit card bill with the highest interest rate first is the smartest way from a purely financial point of view. But paying off the smallest debt first may give you the confidence boost you need. Think how good you’ll feel when you cross that first debt off your list.

So, while you continue to pay the minimum due on other credit card bills, throw every extra cent you have at the first debt on your list.

Do whatever is necessary to come up with more cash to pay down the debt. Cut expenses, sell stuff you don’t need, take on a side hustle. Anything that brings in more cash will get you that much closer to being debt-free.

Once the first bill on your list is paid off, apply the amount of money you used for payments on that debt to the next credit card debt on your list. When it is paid off, repeat the process with the next debt, until all of your debt is gone.

What if your debt has spiraled out of control and the collection companies won’t stop calling? Your best bet may be a reputable credit counseling agency. Stop by our Solutions Center to look for help paying off your debts.

For more tips, check out “7 Great Tools to Help You Get Out of Debt.”

Karen Datko and Chris Kissell contributed to this report.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
The 13 Worst Types of Tickets for Your Car Insurance Rate
The 13 Worst Types of Tickets for Your Car Insurance Rate

Some types of traffic violations can drive your car insurance rate dramatically higher.

4 Ways the Social Security System Will Change in 2020
4 Ways the Social Security System Will Change in 2020

These adjustments will impact both workers and retirees in the new year.

5 Ways Retirees Can Lower Their Income Taxes
5 Ways Retirees Can Lower Their Income Taxes

Here’s how to keep Uncle Sam’s mitts away from your nest egg.

Not Asking About This in the Hospital Can Cost You Thousands
Not Asking About This in the Hospital Can Cost You Thousands

Medicare recipients who fail to clarify their hospital status can pay a high price.

Why Cutting the Cord Can Be Confusing — and How to Decide If It’s for You
Why Cutting the Cord Can Be Confusing — and How to Decide If It’s for You

Streaming TV might sound like the antidote to sky-high cable bills, but cutting the cord is easier said than done.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.