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Which revolving line of credit should take priority for payment?

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Regular Contributor

Which revolving line of credit should take priority for payment?

Hello, 

 

I am pretty new here and wasn't sure where to post my question but I think I am in the right place. Anyway, here is my question. In mid-August I will be able to pay off half of my revolving debt in one shot (about $2500-3000 to put towards debt reduction). However, I am not sure which one of my accounts I should take care of first. I currently have 3 open accounts and 1 closed one (with a balance).

 

 

The open accounts are: 1) $2500 limit Platinum Visa [16.99%] and 2) a $1000 limit Visa [12.99%] through another credit union, both of which are maxed out. I also have a Auto Edge GE card with $475 available and a zero balance. Now here is the kicker. I also have a Citi account that I closed back in 2009, that has a $2800 balance [originally $4700 limit prior to closing] left on it at 24.99% APR. I have NEVER stopped paying the monthly or was ever late even after I closed the account (due to my non-knowledge about credit at the time + the insane interest they bumped it up to).

 

 

So what should I pay first? Part of my open accounts or should I knock out the closed one first? I've heard that by paying the closed account first that I would actually REDUCE my revolving limit somehow and that would lower my score. But this is the highest interest account. I just have not seen too many posts on this that don't involve charge-offs or non-payments to closed accounts, which is not my situation. 

 

Thank you for your help and advise! 

 

P.S. My goal is to pat the other "half" of what I owe in January when I do my taxes. 

 

 

Amex Platinum [NPSL] / Amex EveryDay $20k / Chase Sapphire Preferred $15.4k / Citi Simplicity $14.9k / Chase Freedom $10k / Amex SPG $10k / Discover It $9.5k / Citi AAdvantage Gold $7.8k / Citi Diamond Preferred $6.9k / CarCare One $5k /

FICO SCORE 8: [EX]: 730 09/08/17 | [TU]: 747 09/07/17 | [EQ]: 740 09/09/17
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2 REPLIES
Established Contributor

Re: Which revolving line of credit should take priority for payment?

Pay highest interest rate first.  Only when you have multiple cards with the same rate should you consider other factors.

FICOs (2/24/12): EX 752, EQ 740
Chase Sapphire Preferred, Freedom; American Express PR Gold, Blue Cash Everyday
Message 2 of 3
Senior Contributor

Re: Which revolving line of credit should take priority for payment?


Koop10010 wrote:

Pay highest interest rate first.  Only when you have multiple cards with the same rate should you consider other factors.


 

+1

Reducing interest cost is most important.   Pay off highest interest rates first.  

 

Also you not be putting any charges on the cards with balances that are being carried, since the interest will start accruing when charge is posted.   You should put all your new charges on a card that you PIF.   If you have none, you may want to pay a low balance one off first for that use.    And pay on your balances, when you get paid, every day accrues interest.  Pay your PIF card off right before due date.   If you manage your cash flow based on interest rate, it can save you some money.

 

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