If you have credit card balances, you know it’s important to try to get those paid off before they accrue too much in interest. What’s difficult, though, is figuring out which one you should pay off first. In this article, we will answer the question: Should you pay off the highest interest or highest balance first?
Should you pay off the highest interest or highest balance first?
If you’re going to start with one, you should start with the card that has the higher interest rate. By starting with this one, you’ll ultimately pay less in overall interest charges. This is definitely the best move if the interest rate on this balance is significantly higher than the rates on your other balances. Also, this option is best if you aren’t able to transfer this balance to another card with a lower interest rate. You could transfer to a card with a lower rate, and try to pay it off before the rate goes up. If you choose to do this, though, make sure the transfer fee is low enough to make it worth while.
What if the higher balance is closer to your credit limit?
Even if the higher balance is over the 20%-30% range that it’s recommended to keep your balance under, it’s still best to pay off the higher interest rate first.
Getting rid of the debt with the highest interest rate saves you the most money as you pay it off. This is because, while the higher balance is accruing a higher dollar amount of interest, the balance with the higher interest is accruing more in relation to the balance.
Do you have any questions about whether you should pay off the highest interest or highest balance first? Give us a call today at 1-866-991-4885!
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