Which Credit Card to Pay Off First?

And now the age old question. “Which credit card to pay off first?”

Pay the Credit Card with the Highest APR First

Well, the short and obvious answer would be the credit card with the highest interest rate (APR).

After all, your credit card with 21.99% APR is costing you more than your credit card with 9.99% APR, so it’d be wise to dedicate more money to the former one.

Again, it’s best to pay off the credit card with the highest APR, not the highest balance; don’t get these two confused.

There seems to be a lot of debate over this seemingly simple question, and that has more to do with emotions than math, because it’s always going to be the higher APR credit card first. Period.

However, for some people, it may be easier to compartmentalize debt into different buckets and pay it off accordingly. The general idea is to set a goal to pay off one account by “X” date, then tackle a subsequent account once that’s done.

This is fine if you want to pay more, or if you think it’ll help you reduce your debt quicker and thereby translate to less interest paid, but it relies on psychology over logic.  So beware.

Getting Out of Credit Card Debt

So the solution to our question may be a relatively easy one, but getting out of credit card debt isn’t, so you need a plan.

The best way to tackle credit card debt is to make a list of all your credit cards, balances, APRs, minimum payment amounts, and so forth.

Then tally up all the minimum payments so you know exactly how much is due each month (this can fluctuate).

Without question, you must make at least the minimum payment on each credit card, as you won’t want any extra fees added on or related credit score dings for failing to make on-time payments.

Once all the minimum payments are accounted for, use whatever extra money you have available (for the purpose of paying down debt) to make a larger payment on the credit card with the highest APR.

This way you focus on the card that is contributing the most to your debt burden, while keeping the rest at bay.

It’s not wise to pay each card down by the same amount or attempt to pay off the entire balance on a card with less debt and a lower APR just because you want to “get it out of the way.”

Some “experts” seem to think this is a good way to deal with debt from a psychological standpoint, but in reality you’re simply throwing away money.

A better recommendation would be to ask for interest rate reductions. You’d be surprised what simply asking will get you these days…if you can lower the APRs on your credit cards, you’ll be even closer to being debt-free.

Also, if you don’t have too many open credit cards with large balances, you may be able to open a new credit card and consolidate the balances on a low APR credit card.

A credit card balance transfer could help you move that high-interest debt over to a 0% APR credit card or a low fixed rate credit card. It’s a simple way to reduce finance charges significantly and get out of debt a whole lot quicker.

Read more: How to calculate credit card interest.