If you have credit card debt that is stagnating or even growing, you may be asking yourself, “How do I pay off my credit cards?” Although this seems like an easy question to answer — just pay them off — there are actually several different ways to pay off your credit cards.

 

Personal finance guru Dave Ramsey recommends that you list your credit cards in order with the smallest balance on top and the highest balance on bottom, regardless of interest rate. Snowball all of your extra cash onto the lowest balance card and when that is paid off, move on to the next lowest balance.

 

There is a sense of winning when that first credit card is paid off, and in an instant gratification society, checking one credit card off or your debt list can help keep you motivated to pay off the rest.

 

Mathematically speaking, the smallest to highest balance order doesn’t make sense. If you want to save the most interest then order your credit cards from the highest interest rate to the lowest and start throwing money at the card with the highest APR. If your highest interest rate card is also your highest balance, you may not be able to mark one off your list for some time. However, you’ll save the most money in the long run.

 

Another way to order your debts is to place cards with a promotional rate first so that you aren’t hit with back finance charges if the promotional rate ends. For example, your local big box store offered zero percent financing on that big screen TV but only if the balance was paid off in 18 months. Focusing on paying off this card first can help you make the payoff date.

 

If you are in the middle of paying down your credit cards, how are you ordering your debts?

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