Which credit card balance to pay off first

Holidays are gone and credit card bills start to file up. If you have several cards with balances, you wonder what card to pay off first.

One may argue that you should pay off the smallest balance first. This may be true if you can pay off the entire balance and you enjoy having a one less card to worry.

On the other hand one may argue you start to pay down the balance with the highest interest first. This may be true because you will be saving on interest charges. However, depending on the balance, you may not feel an improvement if you don’t pay a substantial amount every month and feel that your balance going down very slowly. For your sanity, you can simply calculate how much you are saving on interest every month by paying the largest balance with the highest interest rate.

Here is another point to consider. Your credit card balance can influence your credit score. If you maintain one half of your credit limit as your balance of each card, it could increase your credit score compared to several cards with higher balances.

So, you decide which balance to pay off first and gradually become debt free.