Which Way Is Best?

When it comes to developing a plan to eliminate your credit card debt, there is a plethora of advice out there: some advocate paying your lowest balance first, some will preach about highest interest balances first, while others advocate evenly splitting your payment between all of the cards. Which one is right? Yes. In other words, there are good points to each method and one can argue in favor of each one, because it a certain style fits your personality, then that is the one for you.

Paying Your Lowest Balance First.

This one has some merit. Here is the premise of this plan: Let's say you have five credit cards, all with various balances and all with different interest rates attached. Just for illustrative purposes, we'll suppose that the minimum payment on each add up to $175 per month. You have scrimped and saved and you have an extra $75 per month (for a total available of credit card reduction cash of $250 per month). With this plan, you would pay just the minimum on four of the credit cards and apply the entire amount towards the card with the lowest balance. Once that card is paid off, you would then apply the extra $75 plus the amount that you had been paying on the lowest balance credit card to what you were paying on the next-lowest balance. When the second lowest balance card is paid off you add all you were paying on that one to the next one, and so on.

The cool thing about this is that you can see some measurable results in a fairly quick (relatively speaking) fashion. This helps to add to the feeling of success and may help you to stay the course. Some feel very strongly about this method. You can find more here.

Tomorrow, we will look at paying the highest interest cards first. Visit my website for more information.