How to start paying off credit card debt?

Question

I have 5 credit cards: 3 are nearly maxed out; the other 2 each has a balance that's half of the total credit limit on that card.

Which is better to do: a) pay off the remaining balance on the 2 cards; or b) pay down the 3 near-maxed out cards? (all 5 cards have similar APRs)

Thanks so much!!

Answer 1

Start paying down the card with the highest interest rate...then the next highest and so on.

Answer 2

Since the interest rates are similar, here's what you should do: Pay the minimum payment on four of the cards and put all you can afford toward the card with the smallest balance (regardless of the card's credit limit). Once that card is paid off, put all you can afford towards the card that now has the smallest balance and continue like that until they're all paid off. Needless to say, you should stop charging anything on any of the cards. Also, do not cancel the cards once they're paid off. Doing that reduces your total available credit, which reduces your credit score. Good luck!

Answer 3

First, you need to change your behavior. Are you done over spending? Are you ready to live below what your paycheck is? If yes, get on a written budget every month. (Each month is different, example some months may have 3 pay days instead of 2 or your car insurance may be due in November but not December). Second, save $1000 baby emergency fund so while you are paying these debts off you don't turn back to the credit cards for the emergency. (Emergency is furnance dies, brakes go out of the car, not Christmas or buying the couch you have been eyeing.)

Next, list all (ALL not only the credit cards) debts smallest to largest. Don't look at APR. Pay off the lowest debt while paying minimums on all the other debts. Once the lowest is paid off (say you were scraping together a total of $100/month to pay on the lowest)- use that money on the second smallest amount.
Example: Debt 1= $200, Debt 2= $500, Debt 3= $1750, Debt 4= $5000, Debt 5= $7000.
You pay debt 1 off in a total of 2 months ($100/month)- YEAH. Then move to Debt 2- if you currently pay the minimum of $50 per month, you will now send them $150/month. That one will be knocked out in about 3 months. Then you apply the $150 to the minimum payment of debt 3 and knock that debt out and keep going until you are out of debt.

You are asking yourself- why pay off smallest debt first? The reason is psychology- you need a quick win to keep you going. Kind of like dieting- when you loose the first few pounds it keeps you going. Same with finance- feeling a sense of accomplishment is what you need!

After you are out of debt then save up 3-6 months of expenses (about $10-20,000 for the average American) for emergencies. Then you start fully funding your retirement (15% of income), fund your kids (if any) college fund(s), and then pay off the house.

For more details read The Total Money Make over by Ramsey. He lays out common sense financial information in an easy to use format. His book and website include budgeting and debt snowball forms.

Answer 4

Let me start off my saying I'VE BEEN IN YOUR SHOES! I don't know how to start without typing for an hour...but just let me say, PAY OFF THE BALANCES WITH THE HIGHEST APR. You say they are all "similar", well, find which ones have the highest apr and get those out of the way, and in the meantime, make as big of payments as you can on the others. If it can only be the minimum payment, let it be. I just made it a habit where I took out AT LEAST half of my paycheck and paid it on credit cards alone. I paid mine off one by one, I think it works better that way, so you're not paying little amounts on every card and getting stuck with a high finance charge. It's better to pay BIG AMOUNTS, one credit card at a time, knock one out, then go to another one. I would pick the credit card I owed the most on and concentrated on that one. I would pay 200 bucks a week on it and before you know it it's paid off. And in the meantime, PUT YOUR CREDIT CARDS AWAY! You're never going to get them paid off if you just keep using them! And once you have them paid off, CANCEL SOME! You seriously don't need 5 credit cards. I had more than that, LOL, and now I only have 2. I have one with only a $500 limit, that's for like gas, grocery's, etc. and I make myself a deal to where I pay it off EVERY month. And my other credit card has a bigger limit and I put it away somewhere to where I can't touch it, it's for emergencies only...or for like Christmas time or something. Trust me, this ALL works! It takes a lot of time but you will eventually get them all paid off. You just have to dedicate yourself and make more than one payment a month on them and DON'T TOUCH THEM in the meantime! I wish you so much luck and hope I helped!

Answer 5

I had 5 cards. All were maxed out, and one was $300 over.

I guess you could pay off the smaller ones, little by little, and then work on the bigger ones.

One was $250, $500, $1000, $2000, $4000, and $10,500 (<=This one was over limit).

What did I do? I had my parents pay them, but I have to work for them while they pay for them, but you are in a better position because they aren't all maxed out. Mine were.

Answer 6

Pay the 3 maxed out ones. Get it off your shoulders then move on to the other 2.

Answer 7

start paying off the near maxed out cards. gets those down. and dont use the other two! then slowly start sending off more money then what the min payment is on each card every month each month pick a card or two to send like a double payment.

Answer 8

A) I would pay off the remaining balance on the two cards, then work on the other three.

Answer 9

The best stategy is to pay off the smallest balence first and when it is paid off cut the card up and then move to the next smallest and so on.

Answer 10

Follow Dave Ramsey's debt snowball from The Total Money Makeover (its a book, and a very good one for getting out of debt).

I'll provide the link, too, but I highly recommend the book - get it at your library.