Which credit card to focus on paying down next?
I have two credit cards to focus on paying down and I don't know which one to focus on. I have two other high interest credit cards I've finally got the balances down to $0 and under $300 respectively. So I'm half way home. Which card should I focus on paying down next?
Card 1: $15000 balance, $18500 limit, 17.74% APR (thru my bank)
Card 2: $8500 Balance, $16000 limit, 17.49% APR (thru Discover)
- AmyLv 79 months ago
Pay off card 2 first.
Right now you're excited to have paid off your first two cards. You're enthusiastic about the progress you've made, which makes it much easier to keep going. Paying off card 2 will make you happier than paying down card 1 by $8500.
You would save a little bit of money by paying off card 1 first, due to the higher interest rate. But depending on how fast you pay it, we're probably talking about less than $50 difference.
- John AldenLv 79 months ago
Uh, the one with the higher balance so you reduce the finance fees.
- Coffee DrinkerLv 79 months ago
Mathematically the best option is to pay the highest interest rate first.
In practice, studies have shown that knocking out smaller debts keeps people motivated toward their goals and often results in them being more likely to stay disciplined which results in less total interest paid.Personal finance is just as much about personal behavior as it is about math.So personally if it was me, I'd knock out card #2 first, then attack that big one with everything I've got. If there was a bigger difference in the interest rates I might feel differently but we're talking about 0.25% here.
But ultimately it won't make a huge difference, as long as you're paying extra on the debts and not ringing up new debt you'll be moving in the right direction. So whatever keeps you motivated to keep going is the best option for you.
- JudyLv 79 months ago
the one from your bank with the 15K balance.
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- Anonymous9 months ago
Card 1 since it has the highest interest rate. But, since the interest rates are pretty close, it really doesn't matter a lot which card you pay off first or pay some towards both as long as you pay the minimum. Card 2 will be quicker to pay off which might give you some mental relief that your debts are going down.
- curtisports2Lv 79 months ago
Why? Because, while the interest rates on the two are close and the advice is generally to pay down the higher rate first, you are using 81% of your available credit on Card 1. That utilization rate is KILLING you. Your utilization rate on Card 2 is much lower, at 53%, which still raises a big red flag, but not as bad as 81%.
I would pay toward both to get (and keep) #2 under 50% and then put every available penny on #1 until you get it (and keep it) under 30% - then switch and get #2 under 30% as well. Get your overall utilization rate below 30% and you should see a significant improvement in your score - at that point, you may be able to negotiate a lower interest rate or find replacements for those cards at lower interest rates.
From that point on, pay down to zero the one with the highest APR.
If those other accounts you paid down are still open, you can use the available credit on those to calculate your overall utilization rate and that can help. You may be able to concentrate on #1 even sooner.
- EvaLv 79 months ago
The APRs aren't very different, so concentrate on the one with the higher balance since it's fairly close to your limit. It also happens to be the one with the higher interest rate. The more you can pay down that one each month the more you will save on interest charges.
- Anonymous9 months ago
If you're worried about your credit score, I'd work on getting the 15k balance down as that's pretty high credit utilization.
If you're not worried about your credit score in the immediate future, I'd knock out the 8.5k as that will be faster. Then you can get to work on the 15k.
- David B.Lv 79 months ago
The most common strategy would be to pay the minimum on the largest balance and as much as possible towards the smallest balance until it is paid off. Then make as large a payment as possible on the remaining account.
- Wayne ZLv 79 months ago
Either one but Card 1 has a slight edge due to the higher APR and the slightly lower balance.