Get tips on the best strategy for paying down your credit card debt.
Recently I’ve received several questions from listeners about how to deal with their credit card debt. The most common question is about how to decide which cards to pay off first and how much to pay. Like this voicemail:
“Hi, my husband and I are piled under credit card debt and we have an opportunity to dip into our savings accounts to take care of at least one or two of the credit cards. And with the economy the way it is now and instability with jobs, we’re wondering if we should just pay off the smallest balance with the highest interest rate or pay 50% of the balance down on one or two, or even three of the credit cards, or just keep paying the minimum payment. Paying down some of the credit cards will free up some more money to do other things with. Thank you.”
The caller didn’t give her name, but whoever you are, thanks for the great question! In this show I’ll give you a smart strategy to use when tackling your credit card balances.
How to Decide Which Debt to Pay Off First
Figuring out how to tackle your credit card debts can be challenging. But if you’re like the caller and are determined to get them under control, congratulations! Paying down credit card debt or eliminating it altogether will save you a heap of interest. I’m sure you’ve got better uses for your hard-earned money than sending it to a bank, right?
Whenever you make a decision to pay down debt, it’s wise to look at the “big-picture” of your financial situation. Before you withdraw money from your savings account to pay down a credit card, the first order of business is to pay off any other debt that should take priority. That might include something serious like a tax delinquency, a legal judgment, or unpaid child support, for example. Those types of debts can be a one-way ticket to the lockup, so always take care of them first! The next debts to pay off are those that are already in default or have been turned over to a collections agency.