To eliminate debt faster than by just making minimum payments, build a debt worksheet to help you prioritize payments. This is also known as the "debt snowball" or "debt pyramid" program. You list your debts, put them in priority order, then start paying off according to your new plan, and watch the balances disappear! Using this program can help you pay off all debts in three to five years, no matter how large your debt is.



Using a standard worksheet form, list all of your credit cards, plus the balance and monthly payment for each. Make an additional column for the interest rate; you'll use this column to sort the data from highest rate to lowest. When paying off your credit cards and other debt, you should list your debts in order of who gets paid first.

Be sure to list all of your unsecured credit card accounts, personal loans, gas cards, store cards, plus you can include secured accounts like car loans, furniture loans, other loans to purchase electronics or appliances. You can include home equity loans and your mortgage if you choose, although housing expenses do not need to go on this list. Don't forget any account that has a balance to be repaid!

Now, how do you prioritize this list? You can sort it one of two ways: by the balance o the cards, from highest to lowest, or by the interest rate they charge, from highest to lowest. This will show you the cards that are the most expensive to keep.

Do you start by paying off the highest interest rate card first? Or the highest balance? Some debt repayment programs will suggest that you start by paying off the credit card with the highest interest rate first. Other credit counseling programs will tell you to pay off the card with the lowest balance - this can make you feel like you're off to a great start! Plus paying off and closing one account will have a fast impact on your overall credit report. (Be sure to close the account after paying it off!) The best course is to do whichever makes you feel like you've accomplished more.

Once you have your list, now you can repay the cards and start rebuilding your credit. The primary rule here is to be sure to pay all of your minimum monthly payments each month according to plan. Starting with Credit Card #1, you will not only make your minimum monthly payment, but also add a little extra payment if possible, no matter how small, to the first card on the list, so you are paying more than the minimum monthly payment. This is the key to reducing your debt fast.

When the first card on the list is paid off, you will then take the monthly payment you were making on that card, and add it to the monthly payment for Card #2. You total payment each month then will not change, and you'll be paying more than the minimum on Card #2. If you can also add that extra payment along with it, you'll really cut into that debt, and pay it off faster.

Continue by doing the same for Card #3. Once you pay off Card #2, you'll take that payment plus the amount from Card #1, and make that total payment to Card #3 to slash that debt. Remember to kick your debt payoff plan into high gear, you should also try to find extra funds each month to add to your payment. The more you pay toward the principal of your balance, the less interest will accrue on your account each month, and the faster your balances will be paid down.

You can see why a program like this is called a "debt snowball" or "debt pyramid", as you make bigger payments each time you pay off a card! This is the same repayment plan you'll see many credit "gurus" using in their ads saying you can be debt free within 3 to 5 years regardless of your total debt.

Once you are no longer making that big monthly payment toward a credit card (and the accrued interest), you can open a savings account or retirement account and deposit the same big monthly payment into an account that will pay you interest instead. This is the way to not just improve your credit and pay down debt, but really build wealth.