Paying off Credit Cards

I remember reading somewhere about the 'best' way to pay off credit cards...but I'm not sure what the order is....

Should you pay off highest balance first? Should you pay off lowest balance first? Or should you look at the interest rate?


TIA

if you can try and make balance transfers to 0% APR for 12 months (they have promotions that they send in the mail), but have in mind any time you go to try and open a card whether you get it or not it drops your credit score by 15 points....

good question. honestly i am not sure.

btw. i just started watching the Suze Orman show. she gives great advice on Personal Finance. she is on Oprah alot. also, has a few books out. she is on CNBC everyday at 8:00 PM. She is pretty funny too.

pay the lowest balance first... then start paying down the higher balances..

I use transfer offers when I need extra cash around... but i dont recommend it if you already have debt...

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Posted by Brian and Marie

Any financial advisor will tell you to pay the cards with the highest interest rate 1st!!!!!!!

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If you decide to follow Dave Ramsey's debt snowball plan, this is actually incorrect.

There is a ton of more detailed info on his website and in his book, but this explains a little bit:

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Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

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I was thinking that the highest interest rate should be paid off first, because each monthly payment is going mostly to interest...and just a little is going to reduce the principal.

Thanks for your advice.

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Posted by PreshusSmurf

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Posted by Brian and Marie

Any financial advisor will tell you to pay the cards with the highest interest rate 1st!!!!!!!

---

If you decide to follow Dave Ramsey's debt snowball plan, this is actually incorrect.

There is a ton of more detailed info on his website and in his book, but this explains a little bit:

---

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

---

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ita ita ita ita!!

I can FM you the name of a VERY helpful woman on LIF if you would like. She sent me GREAT spreadsheets based on this method!!

It is SO true. I know it is purely psychological BUT every month I write out what bills i have to pay and to see that list get shorter and shorter is a GREAT feeling! Sometimes I even leave the old debts on the list with a 0.00 balance so I can CROSS them off with a red pen each month!

I think you have to find a method that works for you. Mine started creeping up when I moved to Boston and then when we started wedding planning. I finally combined everything on to one card, and when I saw the total amount, I was shocked. I made a committment to pay off the largest amount I could each month and avoided making any new charges. I finally have them paid off!!!!! Just in time, too, because we're having a baby in January.

If you follow this route, though, you have to be careful. Even though there are offers for 0% interest on balance transfers, some companies make you pay a steep finance charge (3-5% of the total amount).

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Posted by ant n tilde

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Posted by PreshusSmurf

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Posted by Brian and Marie

Any financial advisor will tell you to pay the cards with the highest interest rate 1st!!!!!!!

---

If you decide to follow Dave Ramsey's debt snowball plan, this is actually incorrect.

There is a ton of more detailed info on his website and in his book, but this explains a little bit:

---

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

---

---

ita ita ita ita!!

I can FM you the name of a VERY helpful woman on LIF if you would like. She sent me GREAT spreadsheets based on this method!!

It is SO true. I know it is purely psychological BUT every month I write out what bills i have to pay and to see that list get shorter and shorter is a GREAT feeling! Sometimes I even leave the old debts on the list with a 0.00 balance so I can CROSS them off with a red pen each month!

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Can you FM me too =)