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What is the fastest way to pay off my credit card balances?
September 08 2011 / Topic: Credit cards
This question has a surprisingly simple answer: Pay off the credit card with the highest interest rate first, while paying the minimums on all of the other cards. Once that card is paid off in full, you should move on to the credit card with the next-highest interest rate, and so on, until they're all paid. This will always result in the fastest payoff, as long as you stick with the plan.
While paying down your balances, resist temptation and don’t make new purchases on any of the cards. Borrowing more will only increase the amount of time it takes you to get out of debt.
Just for convenience, consider paying off a card with a very low balance first, so you have one fewer bill to deal with each month. It also can be motivating to knock one off quickly.
But don't push this idea too far. If you pay off all of your cards this way (smallest balance first) you could end up paying a lot of additional interest. Given the choice between chipping away at $200 on one card where you're paying 18% interest or $200 on another where the rate is just 6%, you'll always do better paying down the one with 18% — no matter how high the balances are on each card.
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