Revisiting a Classic Question
I want to know what debt to pay off first. I have four credit cards, all with about the same interest rate, but with different amounts on them. Do I pay off the highest one first or the lowest one first? — J.B.
A good ol’ fashioned “which credit card should I pay off first” question that’s worth revisiting every now and then. Should you use the snowball method, or avalanche method? If the interest rate is the same across all your cards, the thing to do is the snowball method—tackle your smallest balances first, because you’ll eliminate it faster, and then you’ll have fewer payments to worry about every month. And then one day you won’t have to worry about making any payments. That’s really the American Dream.
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Previously on The Billfold
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I sort of do the avalanche method, except I also round up my payments on all the other bills, too, so I’m making bigger progress on them at the same time (e.g., on my high-rate debt I pay an extra $150 a month beyond the minimum, but on the others I round up to the nearest $50 or $100 every month so I’m still speeding up my payoff date for those as well, a little at a time). It gives me the most gratification on balance.
@ThatJenn I do that, exactly. I think it’s half gratification and half being OCD about wanting my bills to be nice round numbers.
@Jeni Vidi Vici Hah, yes. I left off the intangible benefit of gratifying my OCD with this trick.
@ThatJenn Ha, I have that wanting my balances to be round numbers thing too, and was recently infuriated when one of my credit cards made a three-cent “interest rate adjustment” to my bill after I had carefully paid it to make it a round number. It was three cents in my favor, but I was nevertheless enraged.