Credit Cards

Pay multiple credit cards? Which ones should you focus on first?

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There is more than one method of debt settlement, and the right one is the one that works for you.

Key points

  • If you have multiple credit card debt, it can be hard to decide which one to pay off first.
  • Depending on your needs, you can pay off the card with the most debt or the highest rate first.
  • Debt consolidation is another option and could lower your interest rate.

If you want to pay off credit card debt quickly, you’ll need to make additional payments to bring down your balance as quickly as possible. You’ll need to pay the minimum on all your cards to avoid penalties, late fees, and bad credit. But after making those minimum payments, you’ll need to decide which specific card to make additional payments to first.

How can you make this choice? There are multiple strategies to consider, including the following options for which cards to prioritize.

You can pay off the card with the lowest balance first

One option recommended by some financial experts, including Dave Ramsey, involves focusing on paying down debt with the lowest balance first. Let’s say you have two credit cards, and one has a balance of $500 and the other has a balance of $5,000. In that case, you would first try to pay the card you owed $500 to.

The benefit of this approach is that you will pay off each of your cards as quickly as possible. After all, it would take you much less time to pay off $500 by making additional monthly payments on that card than it would to pay off $5,000. The idea is that once you’ve paid off a debt in full, you’ll be excited about your progress and motivated to keep going.

The problem is that the card with the lowest balance is not necessarily the one with the highest interest rate. And if you hold onto high-interest debt longer than you need to because you’re paying off other cards first, it will cost you money in the end.

Still, this approach can work well if you’re worried about missing your payment plan.

You could prioritize cards with high interest rates

Another approach is to pay off the cards in order of interest rate. If you choose this option, you’ll spend every extra dollar you can on the card with the highest finance charges.

Over time, this will save you a lot more money than focusing on paying off small balances first, especially if there’s a lot of variability in your credit card interest rates. The downside, however, is that it could take a long time to pay off each debt, especially if you have a high balance on a card with a very high rate.

If your top priority is paying as little interest as possible over time, this approach is right for you. Just make sure you’re confident in your motivations and committed to sticking with your debt repayment plan, even if you don’t see immediate wins.

Debt consolidation is also an option

Finally, you have the option of consolidating your credit card debt so you don’t have to choose a payment method. And this might be the best approach of all.

If you can pay off most or all of your credit card debt with a personal loan at a lower interest rate than you’re currently paying, you won’t have to choose which debts to focus on. You can simply work on paying off your loan, which should have fixed monthly payments, a set payment time, and lower finance charges.

Consider each of these options to decide which one is best for you, given whether you can qualify for a personal loan and how motivated you are to pay off your debt. You can’t go wrong with either option, as long as the one you choose works for you and helps you get rid of credit card debt for good.

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