I was hoping to get some advice regarding my plan for paying down my debt. I'm planning to start using the avalanche method to start paying down my balances, but with a slight modification. I have several high-interest (40-80%) loans that I plan on attacking first. I also have several credit cards which are close to maxed out that are all between 20 and 25%. Recently, I got in the habit of calculating how much my bills will be that I can pay by credit card. When I get my paycheck, I transfer that amount to one of my cards and set up the payments for the bills to go through the day before they are due, maximizing how long that money stays on my credit card and ensuring I don't have any late payments. I'm hoping this reduces the amount of interest I'm being charged since my daily balance is reduced. I also allocate the amount I plan on using for groceries to another card and gas to a third. I feel this helps me stick to the budget since I cannot spend more than I allocated on the cards.
One thing I worry about though, is that I am using up the minimum monthly payment the way I am doing it now. However, if I am able to apply the money I would be putting towards the minimum on the cards towards paying off the loans instead (ranging between 40-80% interest) I think that would be a better use of the money. Not sure how the math works out for this.
My husband works as a contractor, so his income is very unpredictable. My income barely covers the bills, so I feel this is the best way for me to approach this situation. Food, gas and debt payments come out of whatever he makes that month. I have been trying to pay off debt and improve my credit history, but living in LA where cost of living keeps increasing is quite difficult. I know this is just the first step and once the loans are payed off I plan on tackling the credit cards one at a time, from highest interest down.
Any suggestions regarding how to do this better would be appreciated. Should I do this with my higher interest cards (25%), or lower-interest cards (20%) which have cash-back (1-1.5%)?