How To Pay Off Your Credit Cards
Great Tips for Credit Card Users
If you have several credit cards and you want to pay them down, you might be confused about how you should go about doing it. There are definitely some tips and suggestions that can help you when paying off your credit card debt. If you’re interested in paying off your credit cards as quickly and efficiently as possible, read on…
Lay It All Down On Paper
When paying off your credit cards, you should first begin by making a list of all your credit card accounts and their balances. This might sound rather odd, but many consumers are unaware of just how much their credit card balances add up to. Make note of the annual percentage rate on each card as well. Hopefully, you don’t have any credit cards with really high interest rates, but if you do, you’ll definitely want to tackle those credit cards first.
How Much and to Whom
If you can afford to make more than the minimum payments on your credit cards, you should put that additional money where it will help you the most. Typically, this extra money should go on the credit card that has the highest interest rate. Some consumers are tempted to put extra payments on the credit card with the lowest balance because they can pay the card off quicker. That’s not always the best way to go. It makes much more financial sense to pay down a credit card that has a 22% interest rate over a credit card that has a 12% interest rate -- so pay attention to interest rates when deciding which credit cards you will be putting the bulk of your money towards.
If you have two credit cards that are close in terms of their percentage rate (say two or three percentage points in difference) then you should start paying on the credit card with the higher balance. The reason is that your annual percentage rate is calculated on your outstanding balance, so it is in your best interest to get that balance down.
Balance Transfers Are an Option
You also might want to consolidate your credit cards by doing a balance transfer to a lower-interest credit card. You just have to make sure that the lower interest rate will compensate for the fees associated with the balance transfer.
It is certainly possible to pay down all of your credit cards, but you want to do it in the way that will benefit you the most. Paying down your credit cards with the highest interest rate should be your top priority -- then work your way down from there.