Which should I pay off first???

Question

Credit Card- $5000 balance 15% interest

Credit Line- $8000 balance 22% interest

Store Card- $1500 balance 23% interest

Store Card- $1200 balance 18% interest

Store card - $1500 balance 26% interest

Answer 1

Normally, I would suggest you pay the lowest balances first, just to get the emotional push of having the most bills out of the way quickly.

But your highest rate card is at 26%, and the balances are very close.  So, pay off the $1,500 at 26% interest first.

Next, pay the other $1,500 balance at 23% interest and, third, pay the $1,200 balance at 18% interest.

After that, it's a toss up.  I think I would start chipping away at the $8,000 balance at 22% interest after you get rid of the first three.

Good luck!

Answer 2

Pay off the 4th one first (balance:  $1,200).  Then apply the money you were paying on the $1,200 card to pay off the card  with ($1,500 / 26% interest) -- and so on.  It will snowball and eventually, you'll be out of debt, unless you keep charging.

Answer 3

You are $17,200 in debt and that sounds like a ton but I'm sure that you can knock this out in less than two years just by having a plan and getting a temporary part time job to help yourself out of this hole.  Here is a plan.  If you work the plan, the plan works for you:

1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2. First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3. Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :

Debt #1 (highest interest): minimum payment+ extra payment

Debt #2 (middle interest): minimum payment

Debt #3(lowest interest): minimum payment

Debt #1: paid off

Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment

Debt #3: minimum payment

Debt #1: paid off

Debt #2: paid off

Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have. In your case you would pay off in this order:

Debt #1- $1500 @ 26% interest

Debt #2- $1500 @ 23% interest

Debt #3- $8000 @22% interest

Debt #4- $1200@ 18% interest

Debt #5- $5000 @ 15% interest

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. You employer probably matches at least part of your contribution so why give up free money. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

Answer 4

Pay off at least a little to each, but pay off a little more to the highest interest rate first!

Patty

http://jstroup.fan-sites.org

Answer 5

Rocky M has the best answer for exactly the reason he stated. Presumably you're not charging anything more.

Beware because credit card companies can change your interest rate on a whim. Make sure you don't miss a payment on any card because that can be enough to trigger a higher rate. Even having the high balances you have can do it.

If you are concerned about the high interest on some balances, would it be possible to do a balance transfer to another card or to a new card?

Also, you could call the higher rate cards and pretend you're going to transfer the balance to a new card at 8.9% and close out your card. They may make you an offer you can't refuse (or they may call your bluff at which point you'll have to pretend you can't find the new card).

Answer 6

go by the interest rates, first the 26 then the 23, 22,18 and 15. make the minium payment on all of them and then throw all the extra money that you can at the one with the highest interest rate. Good Luck.