Chip Lupo, Credit Card Writer
You should pay off the credit card with the highest interest rate first because you’ll save the most money on interest charges that way. Begin by ranking your debts by interest rate, from highest to lowest, and apply the biggest payment you can manage toward the balance with the highest interest rate. In addition, pay at least the minimum amount due on all of your other credit card accounts every month until the higher-interest debt is paid off. Then, move on to the balance with the next highest interest rate and repeat the process with each card on the list until you’ve wiped out all your debts.
The various approaches to this problem have their own merits and drawbacks, though, depending on your financial situation and goals. You can learn more about your options below.
Common Credit Card Payoff Strategies
Pay Off the Card with the Highest APR First to Save Money on Interest
This strategy could save you hundreds, if not thousands, of dollars in interest. But it could take months, or even years, to pay off all your balances. This could make it harder for you to stay motivated to keep paying down your debts.
Pay Off the Card with the Lowest Balance First for a Sense of Accomplishment
Employing this method will make you feel like you’re making progress. As soon as you pay off the account with the lowest balance, move on to the card with the next lowest balance, and so on until you’ve rid yourself of all your balances. Just don’t forget to make at least the minimum payment on your other accounts as you go.
Pay Off Any Card with Deferred Interest by the Time Limit
If one of your credit card balances is from a deferred interest offer, you should pay it off before the promotional period ends. Otherwise, you’ll be on the hook for all retroactive interest, dating back to the original purchase date.
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