Control Credit - Debt

Eliminate Debt with the Roll-Down Method

The roll-down method to eliminating credit card debt applies two simple principles to minimizing credit card debt:

  • Pay off the balance with the highest interest rate first.
  • When a card balance is paid in full, roll amount down to card with next highest interest rate.


Sample Case - Jane Q. Student
In the following scenario, Jane has three credit cards and a total debt of $1600. The three cards are:

  • Target: $800 total with 24% interest rate
  • $20 minimum payment

  • Visa: $400 total with 17% interest rate
  • $16 minimum payment

  • MasterCard: $400 total with 17% interest rate
  • $16 minimum payment

The total monthly payment Jane owes to all three cards is $52.

Jane commits to adding more funds ($30) to her total monthly payment. She then applies this additional amount to card with highest interest, in this case the Target card. Once the balance on the high interest card is paid in full, she continues to pay $82 per month, but rolls the amount down to card with next highest interest rate. By applying the roll-down method, Jane eliminates her debt in just about 2 years.

  1st Cycle 2nd Cycle 3rd Cycle
Target (24%) $50 Paid in full Paid in full
Visa (18%) $16 $66 Paid in full
MasterCard $16 $16 $82
Total Payments $82 $82 $82

By comparison, if Jane had paid the minimum payment to each card each month, the $1600 debt would have taken over six years to eliminate:

 

Original Payment Plan

Roll-Down Method

Years to Pay Debt in Full

6 years and 10 months

2 years and 1 month

Monthly Payment

$52 (1st 5 years)
$20 (last year and 10 months)

$82

Interest Paid

$1,020

$353