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Which Credit Card Should I Pay First?



Question: My boyfriend and I want to get married in a few years, so I’m trying to not only save for a wedding but also pay off my credit cards so we can start a new life with a fresh start. Here’s the problem: My dad is a big fan of [Christian personal finance author] Dave Ramsey, who says on his website, “You should pay off the smallest debt first to create the greatest momentum in your debt snowball.”

But my boyfriend says he read one of YOUR books; and you said to pay off the credit card with the highest interest rate first. How can two experts have totally different opinions? Why is financial advice so complicated? And what am I supposed to do?

— Emily in New York

Howard Dvorkin CPA answers…

Actually, money isn’t complicated at all, Emily. People are complicated.

Dave Ramsey and I have two different opinions because he focuses on your psychology. Meanwhile, I focus on your finances. Let me explain.

If you read Dave Ramsey’s books, he theorizes; “You need some quick wins in order to stay pumped enough to get out of debt completely.” Basically, he’s telling you that paying off a credit card quickly; even if it doesn’t make the best financial sense — will give you a psychological boost to keep going.

However, as I wrote in my book Credit Hell: How to Dig Yourself Out of Debt…

If you can’t pay the balance in full on each of your credit cards, focus on paying off your highest-interest-rate cards first. Once you have paid the balances on those cards in full, put the money you were paying on them to the card(s) with the next-highest interest rates.

Why the difference? Because I’m trying to save you as much money as possible, and I’m guessing that you will be just as psychologically motivated by seeing big savings — in the form of money you’re keeping in your pocket instead of sending to the credit card companies.

Because you wrote me — which takes courage — and because you have a tangible and important goal, I think you have the drive to stick to a plan that will get you out of debt and into a beautiful wedding dress. Therefore, I suggest you pay off your highest-interest-rate cards first!

Good luck, Emily! As the wedding approaches, tell me how you fared. I may have a wedding gift for you!

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