Which Credit Card Should I Pay Off First?

Putting out fires one credit card debt at a time.

Choosing the credit card to pay off first

It’s the age-old question – what should I pay first?

When it comes to debt overall, most of us have strong opinions of what to pay first –  you pay the mortgage, because if you don’t you can lose your home. It’s usually the car note that gets paid next because you need your car to get around.

Your credit cards are usually in the next tier, with other debts like student loans, personal loans, and medical bills. But how do you prioritize these? And how do you know which credit card to pay first?

Everyday debt elimination – targeting high interest debt

In normal circumstances, you’re paying everything so you shouldn’t have to prioritize paying one debt over another. You pay the required amount on everything you owe.

But setting priorities comes into play for making extra payments or bigger payments to eliminate your debt load faster. The faster you get rid of debt, the less you’ll pay with added interest charges. So it’s in your best interest to eliminate your debt as quickly as possible.

You might think this means putting a little extra to every debt you have, but that’s not the case. You pay off the unsecured debts like your credit cards first, because they have revolving payments.

Fact: There is no payment benefit in making extra payments on fixed debts like loans – in fact, there can be penalties.

Credit cards all have a minimum payment limit. You’ll usually never pay less than $15. So if you eliminate all of your credit card debts at the same rate, you end up with a lot of $15 charges.

So it’s better if you focus your extra payments on one debt at a time. In this case, you pay off the debt with the highest interest rate, and you save money as you eliminate debt. A higher interest charge means the debt grows faster with interest added each month. You want to eliminate higher interest rate debts as quickly as possible.

Elimination during distress – strategically treading water

Of course, things don’t always go smoothly. Things get tight and you start pinching pennies…
Then it gets a little worse and you start choosing between your bills.

If it’s this bad, what you need to do is minimize the damage as much as possible until you find the debt solution you need – and you need a debt solution. Now!

In the meantime, try to minimize any damage as much as possible. If you have the money, make all your minimum payments to minimize any further credit damage. You also want to keep your debts out of collections, so if you haven’t paid a debt in four to five months, pay that one first! Debts go to collections after six months and this may cause issues with consolidation.

And once you’ve solved your current problems, never let it get this bad again! You should be able to pay everything comfortably and have money left over for savings. Balance your budget and take steps to keep from amassing debt to cause problems.