Which cc to pay off first?

[Anonymous]

Hi, I have three credit cards I need to pay off, one is $5500 balance, one is only $600, a third $800. The interest rates on all are about the same, one of the lower balance cards is 1% higher than the others. Would you suggest I pay the two small ones off first, or pay off the large one first, so I'm not hit with all the interest every month? Or does it really matter, since the interest rates are pretty close?

Thanks! Also I'm looking at transferring balances to lower rate accounts too.

[AverageJoesCredit]

More info needed. Like are any of these on 0% promo periods? Whats your currrnt credit profile look like.? What are the actual apr of each card and perhaps which cards do you own? Any certain reason you need to pay these off right away or is there time. The more info you provide, the better the advice you may recieve. Thanks

[HeavenOhio]

Which cards do you have? What are their balances and limits? Is scoring your goal, or is that not an issue?

[Anonymous]

We need more information to give you the most informed answer.

For starters we need more details on the credit profile like the credit lines of each card. Also include any cards/lines that are at a $0 balance.

What are you trying to accomplish first? Increase of credit score? Saving money? Lower monthly payments? We also need to know what you are going to be able to pay each month extra on cards (not what you want to pay but what you are actually going to be able to pay). This helps to create a better plan that better suits your needs.

[SouthJamaica]

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@Anonymouswrote:
Hi, I have three credit cards I need to pay off, one is $5500 balance, one is only $600, a third $800. The interest rates on all are about the same, one of the lower balance cards is 1% higher than the others. Would you suggest I pay the two small ones off first, or pay off the large one first, so I'm not hit with all the interest every month? Or does it really matter, since the interest rates are pretty close?

Thanks! Also I'm looking at transferring balances to lower rate accounts too.

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I would pay off the 2 small ones first, get rid of the monthly payments & interest. Also that would give the best boost to your score.

[Anonymous]

Sounds like the "snowball method" would work well for you.  Pay off the lowest balance first, paying the minimum on the others, then once it's paid off, apply the amount you were paying toward that card toward the next higher balance card + its minimum.  As you pay off each debt, you'll have more to put toward the next one, hence the snowball effect.

Now if you have any cards that are maxed out (over 89% of credit line used), I'd pay them down first to improve your scores and to give some cushion for the interest charges, then resume the snowball method afterward.

[Anonymous]

Sure, here’s some detail - two Cap 1 cards, one is Quicksilver with balance of $5,642, APR 24.15. Other is Platinum mastercard balance $815, APR 25.99. third card is credit one bank, balance $650, not sure exact APR, I think its 24. None have any credit available, and none are in the introductory period.



I have $1500 cash I can apply right now. My first instinct was to make the small ones disappear, but I figured I’d check with someone else. TOP priority is to help my score, secondary is to lower my payments / interest hits. No car payment (at this time), no other revolving retail debt.

[HeavenOhio]

Consider that anything over 88.9% of a card's limit is considered maxed. Maxed out cards really kill your score.

Ideally, you should start by bringing your balances down to about 84–85% of their cards' limits. That would hopefully absorb the interest that would appear on your next statement and hopefully keep you under 88.9%.

Not knowing your limits, it's tough to give you numbers. Assuming that each card is at exactly 100% of its limit, I'd guess that approximately $1,150 would bring each card down to 84%. I'd pay each card down to that level, then throw the rest at the card with the lowest balance.

After this round of payments, I'd make the first priority to keep your cards at 84% or below, then throw any extra at your lowest balance with the eventual aim to bring that card to zero. After that, bring the next card to zero.

[Anonymous]

Thanks everyone for the input. I'd forgotten about the 85 - 88 or 89% thing. It was at the back of my mind, but I'm glad you mentioned it. I'll make those payments first, then start a snowball strategy on the others.

[Anonymous]

I would personally just keep it simple and pay off the two smallest cards. You'll get some nice points from having two cards report $0. I can't imagine it would be a whole lot different than any other strategy you could come up with.

As soon as you are able, get that big card under 89%.

If you aren't on a budget, now is the time.