Monday, August 17, 2009

How did I decide which credit card to pay off first?

How did I decide which credit card to pay off first? I started paying off the credit card with the lowest balance first. While tackling the lowest credit card balance, I was still paying the minimum payments on the other cards. So, I didn't get any nasty fees because of a missed payment.

I felt like I was accomplishing my getting out of debt goal with this method. I would get a boost each time I paid off a credit card with a small balance. Even though I had a few other cards with large balances it still made me feel good. Plus it kept me motivated and on track. For instance, I paid off a $1,000 balance and even though I still had $19,000 in debt I knew that I could keep going.

However, this method will not save you the most money in the end because of the different interest rates that you have on your cards. Paying off the highest-interest rate card first will save you the most money in the end. But for me it was more motivating to just tackle the card with the lowest balance first.

I say whatever works best for you and keeps you going is the best way to go. It is all about paying off that debt and getting you to a place of freedom.

Even Lisa Ray, a financial-education specialist at the Consumer Credit Counseling Service of Greater Atlanta talks about this method. She states,

"with this method, you pay down the lowest-balance card first and pay minimum balances on the rest; as each card is paid off, apply the money you would have paid on it to the next-lowest-balance card, and so on."

I love making lists. I always have lists going on and I feel so satisfied and accomplished when I cross something off my list. So, when I had all of that credit card debt in my mind I had a running list of the credit cards. I would cross off the ones that were paid off. Let me help you visualize this with an illustration.

Here is my list when I am paying each credit card and spreading my money over the different cards.

Here is the list in my head when I tackled those lower balances first.
As you can see I felt better in my own mind when I paid off the smaller balance first because I got to cross something off my list. Now it is your turn to cross something off your debt to do list. Good luck and I am here for you!

Best wishes,


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