Which type of credit card would be best to pay off first, a lower account balance with a higher interest rate or a high account?

I think the answer depends on what your objectives are. Paying off high interest debt first does save you money in terms of interest costs. However, another thing you may be looking to do is keep your credit score as high as possible.

If that's the case, you may want to keep all your credit card balances at less than 30% of their total limit. If you have a card that's close to the limit and one that's far away from it, it may be best to pay off the card that's closest to the limit first. I have a couple of lower credit limit cards that I never use.It's simply not worth hurting my credit score, as I can't use them for day to day spending without running them up above 30%.

Whether you pay the cards off every month or not is inconsequential. If you use the credit, it shows up on your report.

I've spent some time doing some budget counseling and there are a couple of different ways to look at this (In both cases I'm assuming the goal is to get out of debt as quickly as possible): 1. Mathematical Analysis - From a purely mathematical perspective, it would make the most sense to pay off your high interest rate card first while making minimum payments on the low interest rate debt. On top of that (as others have indicated) if the option to move the high interest rate debt onto your lower interest rate card, that would decrease your overall payments. This is a great approach for many people - especially someone who has good self-control and a seemingly manageable amount of debt and can pay it off fairly quickly.

2. Psychological Approach - People can often get discouraged if they have huge amounts of debt and/or if paying off debt slowly. Watching that high interest balance decrease SOOO slowly might be discouraging.

In that case, it might actually make sense to get a little victory and pay off the small balance quickly. Part of this process is endurance and having a minor victory on the way can really encourage people to keep going. Also, for some people, paying off the smaller debt can help them focus and stay on track.

I would only suggest this approach for certain people, but in some cases, this is a great way to get people on the right track. One unrelated note: if at all possible, cut up your credit cards and go to a completely cash based system during the process. Nothing makes paying off debt harder than adding MORE debt during the process!

It's hard to say without knowing the exact numbers (balance and interest rate) on each card, but it sounds like your approach is probably a good one. I would create a spreadsheet and run the numbers for 12 to 24 months to see which balance becomes more problematic over time -- that's the one you want to tackle first. For example, if you have a lower interest on one card, but you're carrying a higher balance, you may find that it's preferred to pay off that card first.

The answer is probably simpler than you think. Assuming that you can't simply transfer your credit from the high interest card to the low one then the answer is to always put as much money as possible into the high interest account while paying only minimum for the low interest one. The exact numbers won't matter.

Why? Well assuming you can only pay off X dollars a month, and that money is fixed regardless of how you divide it between the two. If A and B are the the interest rates (per dollar per month) of the two cards, and A > B, then A*X is the interest you save from putting all of your money in the high interest card, and B*X is all the interest you save from putting all of your money in the low interest card.

Given A > B then also A*X > B*X. In other words you will always save more money on interest putting as much as possible into the high interest account. The amount in each account is irrelevant, even if your low interest account is paying more in interest total than the higher interest account, you will be able to knock much less of it off by putting the money into it.

I hope this makes cents (horrible puns are so much fun).

It is very nice and it's quality impress me. Really it is very good looking url=consolidebtllc.com/debt" rel="nofollow">consolidebtllc.com/debt settlement service/url url=consolidebtllc.com/debt" rel="nofollow">consolidebtllc.com/debt settlement strategy/url.

Pay off the one that costs you most each month first. Two reasons: 1: It will save you money 2: It will encourage you to become debt free because you'll hit a goal sooner Let's deal with the first point first: Simple example - if one is at 12% interest, and the other at 18% interest (per year), then in round terms the first costs 1% a month, and the second 1.5% a month. (It's not QUITE that simple, because of the way that monthly interest compounds, but close enough to show the difference.) Say you've got $100 in your pocket to make an extra payment over what you need to.

If you spend $100 paying off that 1.5% / month account, you will save $1.50 next month. If you spend $100 paying off that 1.0% / month account, you will save $1.00 next month.So, you are better off, albeit only by 50c / month, by paying off the higher-interest card first. Now, 50c doesn't sound like much, but it's 50c better than nothing... Now that second reason - if you have two long-outstanding balances, and want to get debt-free, then this takes discipline.

The way to keep discipline is to maintain motivation - and frankly, nothing motivates you more than feeling that you have COMPLETELY PAID OFF a card. Which card is easier to pay off? The one with the lower balance, of course.... ... so by going for the higher-interest, lower-balance payoff, you save money AND get the motivation fix needed to keep you overpaying every month.

While I will not attempt to speak for others, in my own personal experience, it has been more beneficial to pay off the cards with the lower interest rates. For example, if I have two cards to pay off and I am paying the same amount on each card, the credit card with the lower interest rate will get paid off faster than the second card because more of my payment is going toward the principle amount instead of the interest. In continuing with the example above, once I am done paying off the card with the lower rate, I then roll over that payment to the second card, thus making two payments in essence, until the second card has been paid off in full.

You don't need a spreadsheet to do some simple math. How much is the minimum payment on each account every month? What is the size of the finance charges each month?

In theory, it is best to transfer the balance from the higher interest card to the lower interest card. Then you'll be able to make a larger single payment there and pay only one finance charge per month. But you need to do your research.

I thought I was being bright to do this one time, and though the card that offered to let me transfer in debt said there was no interest for X number of months, the "FEE" to make the transfer was substantial and more than covered the interest they were waiving for a few months. So also be a detective as you do the math. If you aren't banking with a credit union, now is a good time to consider setting up an account.

And while you're doing that, inquire about their credit cards. I think you'll find they are much more civilized in how they manage their cards and don't gouge customers like the big commercial providers do. If you can't commingle the two existing cards without paying a large fee to do so, then consider setting up a third, at a credit union, and moving the balances over there.

I like to have a couple of accounts, to go back and forth between (and one to use only for online purchases). I'd drop the card with the highest balance, or leave it unused (if they charge an annual fee you might want to discontinue it, same if they offer to start charging that fee if you don't use it enough. ) I've scanned the literature and included several links to information about comparing banks to credit unions.

I find that the State of Massachusetts offers a site to compare checking account services (db.state.ma.us/dob/banksmain2.asp). You might want to look in your state to see if there are consumer agencies with this kind of information for your community. I hope that helps!

By way of disclaimer, I'm about to the point to combine the balances on a couple of cards, and while I do bank with an out-of-state credit union (I inherited the accounts when my father died, because he'd had me co-sign) I am thinking about setting up another here in my state. I'm getting tired of the constant nickle-and-dime of my local (national chain) commercial bank. I joined them years ago mostly because they had ATMs all over.

Now the credit unions have a lot of them to choose from. Any institution will charge some fees, you'll never avoid them. There are associations of credit bureaus, so I can go into a credit bureau here in Texas and deposit money or withdraw it from my account in Washington.

But I'm thinking I'll try out this educational employee credit union, and if I like it as well or better, move my business here where I live and work.

I cant really gove you an answer,but what I can give you is a way to a solution, that is you have to find the anglde that you relate to or peaks your interest. A good paper is one that people get drawn into because it reaches them ln some way.As for me WW11 to me, I think of the holocaust and the effect it had on the survivors, their families and those who stood by and did nothing until it was too late.