(844) 845-4219
2 men with a fire hose trying to put out credit cards on fire (illustrated) - Which to pay off first.

Which Credit Card Should I Pay Off First? » Credit Card Debt » Which Credit Card Should I Pay Off First?



Deciding which credit card to pay off first depends on the interest rates and status of your accounts, as well as your primary objective. In most cases, your primary goal is usually to get out of debt as fast as possible.

That helps minimize interest charges, so you can save money as you become debt-free. However, if money is tight and you’re struggling to gain momentum, you may need a different strategy. Let’s start here first and then move onto professional help.

Method 1: Prioritize credit cards by interest rate

The most common way to decide which credit card to pay off first is to arrange your accounts by APR. The idea is to pay off the debts with the highest interest rates first because those cost you more money. So, if you have three cards that have APR of 15%, 20%, and 22% then you’d pay off the balance at 22% first.

You still make payments every month on the other two cards, but you only pay the minimum required payment. Then devote all your extra cash to making the largest payment possible on the card with the highest APR. This keeps all your accounts current, so you don’t damage your credit history while focusing your efforts on repaying one debt at a time.

By paying off the highest APR debt first, you will save money as you work to get out of debt. That’s because higher APR means higher accrued monthly interest charges.

The challenge of prioritizing credit cards by APR

Although prioritizing balances based on APR makes sense on paper, it doesn’t always work in practice. If the credit cards with the highest APR also have your highest balances, it can get tough to stay motivated as you eliminate debt. In this case, it may make more sense to take a different tactic that can help you build momentum to tackle these largest debts.

Looking for the best way to pay off multiple credit card balances? Get a free debt evaluation now to discuss your options with a certified professional.

Find Relief NowCall To Action Link

Method 2: Prioritize balances from lowest to highest

Another option for how to prioritize your balances for repayment is to start with the lowest balances first. This helps you do two things:

  1. It’s motivating to pay off balances and eliminate bills, giving the momentum you need to tackle your largest debts.
  2. Knocking out bills frees up cash flow, giving you more paying power to eliminate your largest balances faster.

As with the first method, you still make the minimum payments on all your other bills. But you focus all your extra cash on paying off the lowest balance with the largest payments possible. If you can pay off one or two low balances that you can, you eliminate those bills and free up cash flow for eliminating the higher balances down the road.

Eliminating balances is also highly motivating. You feel like you’re making progress, so it’s easier to stick with things like cutting back in your budget. Starting with your largest balances first can get exhausting. And much like dieting, if you can’t stick to a plan, then it’s not going to get you the results you want, even if it’s the best thing for you.

Combine the two methods

If you’re short on cash for eliminating debt, but you still want to eliminate your debt efficiently, then you may decide to combine the two methods. First, pay off a few low balances to generate cash flow. But then once you generate enough cash to make larger extra payments, switch to prioritizing your debts by APR.

Making exceptions based on the status of your accounts

There are a few special considerations that you may need to make, depending on the status of your accounts. These accounts would take priority over arranging your debts for payoff using the methods above.

Catch up delinquent credit card accounts first

If you have any credit cards that are delinquent, then your first priority needs to be getting those accounts current. Delinquent accounts refer to any balance that is more than 30 days past due, but that hasn’t been charged off. In other words, accounts that are behind but that can still be saved from collections.

Once an account is more than 60 days past due, the credit card company will report the delinquency to the credit bureaus. Every month that passes before you bring the account current will; ding your credit. The damage to your credit score stacks up quickly.

So, your first priority needs to be bringing delinquent accounts current. This means paying the minimums on all your other balances to keep them current. Then you focus all your cash on catching up with the delinquent account. Review your budget and cut back as many discretionary expenses (wants) as you can afford to give up. This will maximize the cash flow you have available to bring those delinquent accounts back to a current status.

Pay off deferred interest balances before the introductory period ends

Another balance you want to prioritize ahead of the others is one that has a deferred interest period. This is where the interest is held for a certain period of time after you first open the account. They’re those offers of, “Pay no interest until June of 2020.”

The problem with deferred interest comes if you don’t pay off your balance in full before the introductory period ends. If you have any balance left at the end of a deferred interest period, then you pay interest charges on the full amount.

Say you buy a $400 TV with a store credit card. You pay $25 on time each month, but by the end of the one-year period, you still owe $100. With a deferred interest card, interest would be adding up throughout the year, and place an extra $65 on top of the amount you still owe.

Source: Consumer Financial Protection Bureau

This means that balances on deferred interest credit cards should take priority. Your priority must be to pay off the balance in full before the deferred interest period ends.

Eliminate transferred balances during 0% APR period

Another credit card balance that you want to pay off quickly because it offers an introductory rate is a balance transfer credit card.

Balance transfer cards allow you to move balances from your existing cards to one with a lower interest rate. Many of these cards offer a 0% APR introductory period. You pay no interest for anywhere from six to 18 months, depending on your credit score. Interest doesn’t defer, but once the introductory period ends the normal interest rate on balance transfers kicks in.

If you have a balance transfer card that’s still in the 0% APR period, focus on paying off that balance quickly. Ideally, you want to eliminate the transferred balance in full before the 0% APR period ends.

If the DIY methods don’t help, it’s time to consult professionals. You can do that right now with Instant Debt Advisor℠. Answer a brief questionnaire about your current financial situation. In minutes – from start to finish – Instant Debt Advisor℠ will recommend debt relief solutions for you and your debt. It has no impact on your credit and you’re in control of your debt-free future.

A reader asked …

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!

Is credit card debt keeping you from success? Learn how to get your debt under control.

Find a SolutionCall To Action Link

How Much Could You Save?

Just tell us how much you owe, in total, and we’ll estimate your new consolidated monthly payment.