The Ultimate Guide to Credit Cards
Tuesday, March 28, 2023

Which Credit Card Should I Pay Off First?

Which Credit Card Should I Pay Off First

credit card advice

Marcie Geffner

Written by: Marcie Geffner

Marcie Geffner

Marcie Geffner is an award-winning reporter, editor, and writer. Her stories about banking, credit cards, insurance, economics, small business, and other subjects have been featured by the Los Angeles Times, Washington Post, Bankrate, Credit Karma, Bookmarks Magazine, FOX Business, CNBC, Yahoo! Finance, and dozens of major U.S. newspapers. Her articles have been cited in seven nonfiction books and two U.S. Congressional hearings. She edits nonfiction, memoir, and fiction, and contributes to Kirkus Reviews. Marcie holds a bachelor’s degree in English from UCLA and MBA from Pepperdine University.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro

Lillian brings more than 30 years of editing and journalism experience. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct instructor at the University of Florida. Today, she edits all CardRates content for clarity, accuracy, and reader engagement.

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Unwanted credit card debt can feel overwhelming. Having a plan to pay it off and knowing which card you should pay off first can help you feel more in control of your finances and improve your financial situation.

The first step is to make a list of your cards with your current balances and the annual percentage rates (APRs) you’re currently paying. If you don’t know your APRs, check your most recent monthly statements or contact your card companies for this information. You may be surprised to discover how high your APRs are, especially if you haven’t looked at them for a while.

Once you’ve made your list, you’re ready to identify which card to pay off first.

Pay Your Highest-Rate Card First

Conventional wisdom offers two approaches to make that decision. They’re known as the snowball and the avalanche methods.

Image credits: Community Resource Credit Union

The snowball approach advises you to pay off your lowest balance card first. Once that card is zeroed out, you move on to your next smallest balance, then the next smallest, and so on. 

This approach gives you the satisfaction of repeated successes as you pay off your relatively smaller balances. Those easier wins can be enticing. The downside is that you’ll likely pay more interest with this approach.

The avalanche approach advises you to pay off your highest APR card first. Once that card’s zeroed out, you pay off the card with the second-highest APR, then the third-highest, and so on. 

If you have higher balances on your higher APR cards, this approach may take longer before you achieve your first, second, and third wins. If you’re willing to forgo that enticement, this approach can save you a significant amount in interest expenses.

Which method is best to pay off card debt? The snowball gathers speed over time, but in the long run, the avalanche should help you pay off more debt sooner. That’s because paying less interest by eliminating your higher APR cards first frees up additional money you can use to pay off your lower APR card balances faster. 

In terms of your finances, the avalanche’s lower interest expense is worth more than the snowball’s early motivational boost.

Combine the Snowball and Avalanche Methods

If you’re still not sure which card you should pay off first, you may want to try a combination of the two approaches. You alternate between the snowball (smallest balance) and avalanche (highest APR) with this option. 

For example, you may want to start with the snowball method to score a quick win or two, then switch to the avalanche method to eliminate your highest APRs. You can then continue to switch between the strategies or stick with whichever method you prefer.

You can switch between the methods to help you determine which you prefer.

The pitfall of this third way is that giving yourself additional flexibility may result in you not having a plan at all or not being able to stick with whatever plan you devise. Don’t let flexibility become an excuse to make random higher payments on multiple cards or abandon your specific goal of paying off one or more of your cards.

Make a plan you feel you can stick to even if a little flexibility is built into it.

The Peril of Only Making Minimum Payments

Regardless of which card you choose to pay off first, you should always make at least the minimum payment for every card you have and pay it on time. This helps you avoid late payment charges and higher penalty rates. 

If you don’t make your minimum payments on time, the charges and rate penalties could slow or derail your plans to pay off specific cards.

Keep in mind that paying only the minimum due will extend the time you’ll need to pay off those cards and the total amount you’ll have to pay to zero out your balances. That’s because minimum payments typically aren’t enough to cover all the interest you owe or any of the balance.

The interest you don’t pay doesn’t go away. Instead, it’s added to your balance

That means your balance will go up even though you paid the minimum due and even if you don’t make any new purchases. You’ll also be charged additional interest on the unpaid interest from the previous month. 

This minimum payment pitfall adds weight to the argument that the avalanche method (highest APRs first) has a clear advantage over the snowball method (smallest balances first).

Before You Start Paying Off Your Cards

Once you’ve identified which card to pay off first, you’ll need to figure out how much more than the minimum amount due you can afford to pay each month. To determine that, take a look at your income and expenses, including all of your minimum card payments.

If you don’t have much extra, try to identify new sources of income, such as a pay raise, a higher-paying job, or a side hustle. Selling stuff you no longer use online may also bring in some extra cash. Look for expenses you can cut back, such as takeout meals, streaming services, impulsive fast-fashion purchases, or pricey vacations.

Don’t put off necessary medical appointments or maintenance to your home or car that, if neglected, could cause more expensive problems in the future. Emergency savings should also be a high priority so you won’t have to borrow when a crisis occurs.

You’ll also have to commit yourself to stop using your credit cards because using them will pile on debt while you’re trying to do the opposite. Make a pact with a friend or family member you can call to top up your motivation if you’re struggling with not using your cards.

You must stop using your cards to make headway with your debt.

If you’re experiencing a severe but temporary financial hardship, such as unemployment, short-term disability, or the death of a close family member, you may want to contact your credit card companies and ask for a lower payment, lower rate, or forbearance program until you recover from your hardship.

If your hardship is permanent or you simply don’t have enough income for essentials, emergency savings, or the minimum debt payments, you may want to ask your card companies about debt repayment plans. 

Typically, your card accounts will be closed and your credit scores will be lower for a while, but a repayment plan can make sense for some people.

If your debt feels overwhelming, don’t ignore it. Make a plan to start paying it off in whatever way you can.

Transfer Balances to Avoid Interest

Balance transfer cards can help you avoid expensive interest charges. As the name implies, these cards allow you to transfer an existing card balance from one card to another. The transfer usually comes with a lower or even 0% interest rate for an introductory period that may last a year or longer.

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That lower rate lets you free up cash to pay off debt sooner. And, this benefit works with either the avalanche or the snowball method. A balance transfer card may also give you a rewards program or other valuable card perks or benefits.

There are a few caveats:

  • You’ll typically need good or excellent credit to get approved for a balance transfer card.
  • Opening a new balance transfer card account can lower your credit scores.
  • If you close the account from which you transferred the balance, your credit scores may drop due to a higher credit utilization ratio.
  • Balance transfer amounts are usually capped, so you may not be able to transfer your entire existing balance (or balances) to one new balance transfer card.
  • Balance transfers usually involve a fee.
  • Your balance transfer card’s APRs will go up when the lower or 0% rate period ends.
  • You may have to make large payments to pay off your balance within the introductory period, even with a lower or 0% rate.

Despite these conditions, balance transfer cards can help you consolidate debt, pay less interest, combine multiple payments, and pay off debt sooner. Be sure to shop around and compare offers before choosing a balance transfer card.

The Choice Is Yours

With multiple strategies to pay off card debt, choosing which card to pay off first may ultimately turn out to be a personal decision. The most important point isn’t which card to tackle first, but having a plan to tackle that first card and then all your cards, one by one, until you achieve debt payoff.

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