Paying off debt?

Question

Is it best to start with the highest balance cards? Or the highest interest cards?

Answer 1

First of all, you have to make at least the minimum payments on ALL of your cards. The late fees and interest rate hikes will be really expensive if you miss payments.

After paying at least the minimums, put at much money as you can toward paying off one card. As soon as you pay that one off, go on to the next one.

As far as what order you should pay them in, there are a couple of different opinions on this. If you are really motivated to pay off your debt and you aren't worried about getting discouraged and giving up, then the best thing to do is to first pay off the card with the highest interest rate. This will save you the most money in the long run.

But, if you have tried to pay off debt before and given up, there's another method that might help you stick with it. You could start by paying off the card with the smallest balance first, then working your way up to the larger balances. This method gives you some small victories along the way, keeping you motivated to pay off your debts. If you're interested in this method, you should go to your local library and check out "The Total Money Makeover" by Dave Ramsey. He does a great job of explaining this method.

Either way, any step toward paying off your debts is a good way to go.

Answer 2

Do this...

Find the total payoff on your credit card -- how much you owe in total, to pay it off for good.

Next, find the MINIMUM payment on each card.

Divide payoff by minimum payment for each card.

Got those numbers? Good! Start paying off the card which has left you with the highest number. Let's say you have 3 cards, 1 of them gives you a score of 30, the next 29, the next 28. Pay off "30" with as much money as you can throw at it. Get "ANGRY" at your debt! While paying 30, try to throw a little more than minimum at 29, and at least the minimum at 28. When 30 is paid off, take the amount of money you used each month to pay it and use it towards paying off 29, along with some extra if you can. When that is done, move on to 28, etc.

This method works because you usually end up paying off the smallest card first, and therefore, see yourself accomplishing things. Debt can be bad for you just because you think about getting nowhere with it, often. Paying off a balance, even a low one, can be a huge confidence booster to keep going. Good luck!

Answer 3

There are pros and cons to each.

If you pay off the higher interest cards first, you will end up paying things off with less money. It will also mean that you will pay things off a bit faster.

However, some people find that paying off the smaller balances first gives them a feeling of accomplishment that makes paying off the rest of the stuff easier. Some have even said that after they paid off the smaller stuff first they then re-doubled their efforts and scrimped and saved a bit more and paid off the debts even earlier.

Either plan is good as long as you stick with it and do not add on any more debt. Go with the one that you feel comfortable with.

Answer 4

Definitely the highest interest. You're paying more for the use of their money.