Sometimes it’s confusing to know which credit cards to pay off first. Here are the things you need to consider so you can get on the path to being debt free.
1Which Credit Cards to Pay Off First
The number of people who have substantial credit card debt has skyrocketed over the last several years as the economy has struggled.
If you’ve been able to reach a point where you can start working on paying off that credit card debt – congratulations! However, it can be difficult to know the best place to start.
When it’s time to start thinking about which credit cards to pay off first, it can be confusing because there are so many options. Here are the steps you can follow to help you start getting rid of some of your credit card debt.
2Gather Your Credit Card Information
The first step toward deciding which credit card to pay of first is to gather the information on your credit cards. Start a spreadsheet that shows every card you have. Also include the balance of the credit cards, due dates, interest rates and the dates when any of those low interests will be raised.
Every expert agrees that you should focus your efforts on a single card. Of course, you have to make the minimum payments on all of your cards. However, extra penny that you can come up with each month should be paid toward the card you are targeting. When that card is paid off, all of the money that you had been paying toward that card should now be paid to the next card credit card.
For example, if the monthly payment was $200 and you were paying an additional $100 each month, that $300 should be added to the payment of the next card you are working to pay off.
3Two Schools Of Thought About Which Credit Cards to Pay Off First
Experts agree that you should focus on one card until it is paid off. However, they don’t agree about which card you should target.
When deciding which credit card to pay off first, some say that you should focus on the card with the highest interest rate. However, others will recommend that you target the card with the lowest balance. Continue reading to help you make a decision.
4Pay Off Higher Interest Rate Credit Cards First
This strategy is recommended because the card with the highest interest rate is costing you the most money. Over the long haul, this is the card that will cost you the most money, which is why many experts say you should pay this one off first. When you are able to eliminate the debt on this credit card, more of your money will go toward reducing your balance instead of paying interest fees.
The downside to focusing on higher interest rates cards when deciding which credit cards to pay off first is that it will take much longer to see results. It will be harder to stay focused because it won’t feel like you are making very much progress in the beginning.
5Pay Off Smaller Credit Card Balances First
The argument for paying off the credit cards with a smaller balance revolves around psychology. It will be easier and faster to get the balance on these cards reduced or even eliminated.
This will be a huge boost to your frame of mind because it’s easy to see the progress you’ve made. Having the feeling of success will help motivate you to keep attacking the credit card balance on your next lowest balance.
The trade off on this is that overall it will take longer to eliminate your debt because interest will continue to accrue at a high rate on the credit card with the high interest rate.
6How to Decide Which Credit Cards to Pay Off First
It can be difficult to decide which credit cards to pay off first, but it really comes down to a simple decision. You just have to decide if you are more interested in the bottom line and long term results or if you need the psychological boost of having early success.
If the bottom line is all that matters, you should target the credit card that has the highest interest rate. If you want to see some quick results, you should target the credit card with the lowest principal balance.
What Do You Think?
When deciding which of your credit cards to pay off first, do you prefer to focus on the high interest rates or the low balances?
If you have friends who are trying to get their credit cards paid off, this article may be able to help them.
