My husband and I have ten thousand dollars in credit card debt. Most of it is on interest free plans, not due to expire for sometime. However, I have two cards at 14% interest and one at 11% interest. Should I pay off the one with the oldest debt, newest debt, smallest balance, largest balance...? Which way will help our credit the best?
Which credit card debt do I pay off first?
The debate on which is better, pay off based on the interest rate or the amount, is one that is argued over by top financial advisors. So, their is not a single correct answer to your question.
The arguement for paying off based on amount is actually to pay off the smallest amount first. This is often referred to as the %26quot;snowball%26quot; method. The idea is that you attack your smallest amount first, then roll the entire amount you were paying on that to the next debt and so one until you pay off all your debts. You build bigger payments to send in like a snowball. The main argument for this is a pshycological one. Because the number of debts you have goes down quicker, it seems more managable and you feel more confident that you can actually get out of debt. This is the method that advisor Dave Ramsey suggests.
The another option is to attack your highest interest rate debt. The arguement here is that when all things are equal, a dollar in the higher interest rate account is costing you more than the same dollar in a lower interest rate account. This method will actually cost you less over the course of paying off the debt. Because it costs you less, this is the method of the two options you gave that I would go with. This is also the method that financial advisor Suze Orman suggests.
Both of these methods work like this. You pay the minimum balance due on ALL debts owed. Then, you take all the extra money and apply it towards the debt you are %26quot;attacking%26quot;, either lowest amount or highest interest rate. Then, once that debt is paid off, you find the next debt to attack based on the same method and you continue to repeat this process until you are debt free.
There is another option that I would argue is the best of both worlds. You can consolidate your debt into one loan. Depending on the type of debt you have, this method will most likely yield a lower interest rate. This means that you get the managability of the smallest amount method and the savings of the highest interest rate method. Sometimes it can be hard to get a consolidation loan from a bank. But thanks to technology, you can get a social loan very easily. This is a loan where people from all over can help fund your loan, and then you just pay them back through the loan facilitator. Here is a link to the company I use, https://secure.lendingclub.com/landing.a... . If is free to sign up and get a rate quote, so you don%26#039;t have to worry about a catch. If you decide to sign up and go this route, let me know your username and I will try and help fund your loan.
As for which method will help your credit the best, the last method will boost your credit the most. This is because you will increase your available credit without increasing how much of it you have used. This brings down your Revolving Creidt Line Utilization which increases your credit score.
Good Luck.
Which credit card debt do I pay off first?
Get rid of the highest interest card first and then work down. When all are paid, cut ALL your credit cards in half.
Which credit card debt do I pay off first?
the one with the highest interest rate!!!
Which credit card debt do I pay off first?
Transfer balances to lower/no interest if you can and then start with the one with the smallest balance and eleminate them one by one.
Which credit card debt do I pay off first?
Most credit counselors will tell you to pay off the highest interest card first. Cut up ALL the credit cards except the one with the best interest rate potential. Don%26#039;t cancel the cards, though, since doing so can actually hurt your credit rating.
Just let the accounts lie dormant after the balance is paid off.
Also, avoid any offers to consolidate the debt. Research shows 90% of people who do this are in the same situation again within 5 years and still owe the original debt.
Which credit card debt do I pay off first?
Put the money toward all of them. Put the most money toward the ones with the highest interest rate. Then do them descending by interest rate. After you have all of your 14 % interest rate ones paid off, go for the next highest interest rate with the largest chunk of the payments. Then just work to pay them off. Continue in order of decreasing interest rate.
Which credit card debt do I pay off first?
I%26#039;m gonna go against the pack here and say pay lowest balance first. Pay the minimum on all but the smallest balance pay everything extra you can afford on it, then move on to the next lowest balance, your goal is to kill the principal after all.
No comments:
Post a Comment