Consumer credit (credit cards, installment loans) is one of the most common personal liabilities — and high-interest debt must be prioritized in financial planning, because its negative compounding effect directly cancels investment gains. China’s credit card daily interest rate is typically 0.05% (approximately 18% annually); US credit card average APRs reached 20–25% in 2023–2024. A ¥10,000 credit card balance paying only the minimum could take 10+ years to clear, with total payments far exceeding the principal.
## First: Complete Debt Assessment
Before choosing a repayment strategy, build a complete debt list:
| Debt | Balance | Min. Payment | APR |
|——|———|————-|—–|
| Credit Card A | ¥8,000 | ¥200 | 18% |
| Consumer Loan B | ¥20,000 | ¥800 | 12% |
| Huabei | ¥3,000 | ¥200 | 15% |
This list reveals: total outstanding debt; monthly minimum payment floor; which debt carries the highest rate (payoff candidate).
## Two Repayment Strategies
**Avalanche Method (mathematically optimal)**: pay all minimums; direct remaining “extra” funds entirely toward the highest-rate debt until cleared; transfer freed funds to the next-highest-rate debt, repeating. Advantage: minimizes total interest paid. Challenge: the highest-rate debt may have a large balance — staying motivated through a long payoff before “winning” the first debt is genuinely difficult.
**Snowball Method (psychologically sustainable)**: pay all minimums; direct extra funds toward the smallest balance until cleared; transfer to the next-smallest balance. Advantage: rapid early wins produce positive feedback and motivation — Dave Ramsey research shows Snowball has a higher real-world completion rate than Avalanche. Challenge: higher total interest paid versus Avalanche.
**Recommendation**: high self-discipline and tolerance for delayed gratification → Avalanche, saves more money. Needs frequent positive reinforcement to sustain motivation → Snowball. A plan you actually complete beats a theoretically optimal plan you abandon.
## Acceleration Strategies
**Increase extra payment sources**: sell unused items, take on side projects, cut entertainment spending — any surplus income goes first to high-rate debt.
**Debt consolidation**: combine multiple high-rate debts into a single lower-rate loan (bank personal loan replacing credit card balance). Prerequisite: you must actually qualify for a lower rate than existing debt, and must not accumulate new credit card spending while paying off old debt.
**Stop adding new debt**: remove credit cards from your wallet to reduce impulse use.
See [Emergency Fund Building](https://sunqi.org/emergency-fund-building-en/) and [Index Fund Investing](https://sunqi.org/index-fund-investing-basics-en/).
