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Wednesday
Jun092010

"Snowflaking"- a new credit term

In small businesses, it's not uncommon to begin by backstrapping using personal credit cards, then moving over to business credit lines as it becomes available.  Because the source of loans for small business has dried up, many companies are left with lots of credit card debt on various cards, with various rates both personal and business related.  When it all gets too much, they start to pay off with transfer balance checks, and it gets worse as they start to use up the credit they just paid off, now with more on different lines.  Private life and business life become one pile of unmanageable bills.   How do you resolve this?  By Snowflaking!

Recently, I had begun to pay off my personal credit cards in a different manner. Instead of paying for it all at once when the bill came in, I have been paying them online with weekly payments as I use them. I made this change about six months ago because  a monthly credit card statement went missing, and even though I never received it, my payment was considered late when I finally realized and called the credit card company.   I resolved to never be in that situation again, so I change how I paid since there was no guarantee the mail would be here 100% of the time.

I like paying this way because I am never late, and it is quite easy to send out several checks from online banking (it only takes a few seconds) to various cards every Saturday morning. When I receive the statement, I've already paid for much of what is on the bill, a good feeling.  What I didn't know- is that there was a name for it! It's called SNOWFLAKING.  I found this term in an article in the StarNews on Sunday, May 16, by Gregory Karp.

The idea behind this is that instead of letting your debt add up (snowball) into an amount your not comfortable with, you pay it off in small manageable amounts, called snowflakes.   This lowers the interest you are incurring, and helps you pay off the debt faster.  

If you have a lot of debt, pick your smallest bill with the highest rate and start to send in payments every week. When you have gotten rid of that, move to the next bill, using that money plus the amount you were spending on the current bill to pay that down per week,  as the amounts get larger (snowballing) you keep applying as you go along.    The majority of all credit card companies will allow additional payments. Use this regularly.  The money you save on interest alone can help pay for principal on the next bill and you will improve your credit too because your balances (and available credit) will be effected right away.  

Use these micropayments to get ahead of the avalanche of bills each month and feel good while doing it! Good luck, and let me know how it worked for your company or private life.

I believe paying  in small increments, as you spend, will make you start to think more about what your paying for also. The idea of paying down debt on one card, then moving to the next is not new, but I think paying for them in smaller increments faster is where this really helps.   Good Luck. 

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    NFL is actually one of the biggest sports in America. It has a big following.
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    QuickBook Training: Virtual Accounting: Wilmington, NC - Accounting: QuickBooks: Bits of Silver Blog - "Snowflaking"- a new credit term

Reader Comments (1)

"SNOWFLAKING" is quite an interesting term. I have never heard anything like that before.
First Economy Meltdown and now snowflaking, don't know what is coming next.
credit repair agencies

November 4, 2011 | Unregistered Commenterjennalee

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