Its Christmas time again and the cards are maxed out. I have 3 credit cards ranging from $500 to $2000. Should I focus on paying off the one with the smaller amount even though the interest is less than the one with the larger amount. The $500 can be paid off in no time but it of course has the lower interest rate. Which is my best plan of attack?
2006-12-07 06:31:08 · 14 answers · asked by truly_insightful 4 in Business & Finance ➔ Credit
I personally would focus on paying down the balance on the account with the highest interest rate first. Over time, you will pay more in interest on the account with the high balance and high interest rate.
For example, if you have $2000 on a card with a 15% interest rate and $500 on a card with a 8% interest rate -- at the end of one year, you will have paid about $300 in interest on the first account, but on the second account, you will have only paid about $40 in interest. This example doesn't take into consideration compounding -- which means that you will start paying interest on interest, and that's a bad thing!
Hope this helps!
2006-12-07 06:39:41 · answer #1 · answered by kerry77 3 · 1⤊ 0⤋
Highest interest rate first, usually. Sit down and get out some paper and see what the costs will be versus the amount of money you will have available. Depending on the interest rates, it might be better to put some money towards each of them or two of the three, but if the highest rate one is a lot higher than the next, pay that one off first because you don't want 24% sneaking up on you.
And don't use the cards at all until they're paid off.
2006-12-07 06:37:28 · answer #2 · answered by Cobalt 4 · 0⤊ 0⤋
Hello, pay off the card that has the highest interest first because the longer it takes for the card with the highest interest to be paid off, even if you don't continually use the card, the balance can grow in no time because of the high APR rate.
Pay off the card with the highest APR rate first
Pay off the card with the next highest APR
Pay off the last card.
Your goal should be not to begin the New year with any credit card debt if you can help it.
2006-12-07 06:41:37 · answer #3 · answered by dymps 4 · 0⤊ 0⤋
I'm assuming you ran up this debt not because of an emergency, loss of job etc. but because you simply overspent your means. If that's the case you will never get out of credit card debt permanently regardless of your plan until you first decide your mature enough to handle credit properly. If you're ready to change your habits then do it the right way by paying off the balances with the highest rates first...don't accept that you need to play games by paying down lower cost of debt first simply because it will make you "feel" better to see a $0 balance owing on a particular card. By doing that you are only assured of two things....it will cost you more money in interest expense and take you longer to reach your goal of getting out of credit card debt. .....get serious about it and do it the right way and commit to never getting yourself into this situation again.
2006-12-07 10:43:41 · answer #4 · answered by SmittyJ 3 · 0⤊ 0⤋
I am in the mortgage business in CA and real estate. I always sit down with my clients and we do debt consolidation. First, you need to cut up those credit cards and have just one for an emergency. IF YOU DON'T HAVE THE CASH, THEN YOU DON'T GET TO BUY IT..... Take all of your bills from the credit cards and pay off the smallest amount first. Then, start with the next one. Always pay more than what you owe for your minimum payment. ( even if it is $5) smallest first then that will be taken care of and you will only have 2 left. I do not have any credit cards and am so happy. I hate them. They will get you in so much financial trouble it is not funny. Stay away from them and cut them up.
2006-12-07 06:48:48 · answer #5 · answered by Promoqueen in CA 3 · 0⤊ 0⤋
I would pay off the one with the highest interest rate first while making sure I make the minimum payment on all the others.
2016-05-23 04:06:17 · answer #6 · answered by Anonymous · 0⤊ 0⤋
You should pay off the ones with the highest balances and highest interest rates otherwise you paying 3 times what you actually spend, also your fico scores, meaning credit rate goes up higher there by making it possible for you 2 negiotage for a better rate for the remaining credit cards. Just give you a better poistion scores go up up up. smile Pay them off
2006-12-07 06:44:45 · answer #7 · answered by silkieladyinthecity 3 · 0⤊ 0⤋
The highest interest rate first. You may want to consider applying for cards with zero or low interest and tranferring the balances onto them. this is one method of getting your debt under control. Just remember to cancel those old cards with high interest rates!
2006-12-07 08:44:34 · answer #8 · answered by curious george 2 · 0⤊ 0⤋
im no money expert, but what i would if i were in your situation is that i would pay the mins on the other cards to avoid further charges and fees and pay off the balance on the high interest card as soon as possible by paying down as much as i can.
by doing that you are avoiding charges on your other 2 cards while trying to get rid of the high interest balance.
thats what i would do.
my 2 cents.
i hate paying interest.
good luck!
holiday times are indeed tough!!
2006-12-07 06:35:59 · answer #9 · answered by myapt5c 2 · 0⤊ 0⤋
If balances are near equal - Highest interest first...Then add the payment amount to the other card's payment.
If balances are way different - Pay the lowest balance first, then you can add that amount to the other card's payment.
2006-12-07 06:39:53 · answer #10 · answered by Anonymous · 0⤊ 0⤋