DOLP Your Debt
Posted on October 27, 2007 - Filed Under Finance |
David Bach, a financial book author and guru, has determined a valuable system for paying down your credit card debt called DOLP, or dead on last payment.
The steps as listed from the Yahoo! article are to:
1. Make a list of the current outstanding balances on each of your credit card accounts.
2. Divide each balance by the minimum payment that particular card company wants you to make. The result is that account’s DOLP number.
For example, say your outstanding Visa balance is $500 and the minimum payment due is $50. Dividing the total debt ($500) by the minimum payment ($50) gives you a DOLP number of 10.
3. Once you’ve figured out the DOLP number for each account, rank them in reverse order, putting the account with the lowest number first, the one with the second-lowest number second, and so on.
You now know the most efficient order in which you should pay off your various credit card balances.
4. Pay as much as you can each month toward the card with the lowest DOLP number. For each of your other cards, make only the minimum payment.
5. Once a card is paid off, cut it up — but don’t close the account! Leave the account open so you have credit you aren’t using, which will help improve your credit score.
Now move the next card up on your list and repeat the process until all your cards are paid off.
Personally, I like this method because I think most of us assume that paying off credit cards with the highest APR is the best method, but Suze Orman mentioned on her show one evening how the credit cards that will take the longest to pay off are usually the ones you need to pay more on to reduce your debt.
So check out the article and let me know what you think.
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