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Which Credit Card Do I Pay Off first?There are many major schools of thought around how to pay off credit cards. The important thing to remember, is to not use the card you are paying off.
The best plan is to first identify which card to pay off and concentrate your payments on one card at a time while making minimum payments on the others. Once the first credit card is paid off, add those payments to the next card you have been making to that company and apply all to the next credit card. Four Methods:
You should pay off the card with the highest Rating In this case; credit card “Visa A” should be paid off first since it has the highest rating and then the “Master Card A".
Let’s see what is will look like if we pay off “VISA A” first: If you make the minimum payments of $190 each month it will take you 262 months (just under 22 years) to pay off your credit card. In that time, you will have paid $10,942 in interest. If you were to add $100 per month ($190 + $100 = $290) to those payments it will take you 27 months to pay off your credit card. In that time, you will have paid $1,815 in interest. You just saved $9,127! Now let’s apply those funds from "VISA A" (now that it is paid off) to “Master Card A”.
If you make the minimum payments it will take you 296 months (over 24 years) to be rid of your debt. In that time, you will pay $11,761.07 in interest. If you take the minimum payment of $175 plus the $310 from “VISA A” it will take you 13 months to be rid of your debt. In that time, you will pay $854.44 in interest. Now you saved an additional $10,907. The power of that $100 per month paid off both cards in 3.3 years and saved you $11,824.
Just follow these instructions:
Enter the name of your Credit
Card Companies in the first
column.
Do this for each card that you have.
This is the hard part: The Rating is calculated by multiplying the balance times the interest rate divided by the total times 100. Balance X Interest Rate / Total X 100 = Rating
Here are some articles on how to determine which cards to pay off first and other debit reduction resources and ideas. |
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How will your change in credit card interest rates impact you?
If you happen to miss a payment on your credit card or any other loan it may impact your credit card interest rate. If you owe about $1,000 at 11% interest it will take you 73 months (6 years) to pay it off and $320 in interest. but when your credit card company increases your interest rate due to a late payment, even if the late payment is not that credit card, they can increase your rate to a penalty rate. Let's say that rate is 19.9% (some states allow up to 29.9%). It will now take you 100 months to pay off your balance (8.3 years) and $860 in interest.
It pays to pay your minimum payments on time.
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FREE Credit Scores for Prospective Borrowers or NOT.
September 5, 2011
It has been just over a month since the new Federal credit score disclosure law went into effect. Lending institutions have already found loopholes to keep from disclosing your credit score when you are denied credit, loan, or if you received less desirable terms because of your score. According to SmartMoney.com there are time you may not get a credit score. These are usually when banks use their own in-house credit scoring system. There are other ways to get your credit score that will not impact your credit rating by going to MyFICO.com Click here for more information.
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