High-interest debt is a truly hideous thing. If "compound interest is the most powerful force in the world," as Einstein is rumored (1) to have said, then the last thing you want is for compound interest to be working against you. If you carry a balance on a credit card instead of paying it in full, things can get pretty bad.
How bad? This bad:
|simulated here: http://goo.gl/FxoJe|
Debt Paydown Strategies
If anyone recommends to you that you pay down your debts with ANY strategy other than:
- Pay the minimum on all debts
- Put all additional available cash toward paying down the highest-interest debt
Feel free to make your own copy of the spreadsheet to play around with it. Bonus points if you can convince someone you know to prioritize paying down their debt faster!
(1) Snopes: Einstein and Compound Interest - http://www.snopes.com/quotes/einstein/interest.asp
(2) Wikipedia: Credit Card Interest - http://en.wikipedia.org/wiki/Credit_card_interest