What is the best method for paying off debt? Which should you pay off first?

[Date_a_Snob]

Updates

+1 y

I have three credit cards with different balances and a line of credit

[Fireguy17]

start with the one with the highest interest.
That is the one that will cost you the most.
Then once that is paid off pay off the next highest one.
If you were making just the minimum payments keep doing that and then apply what you were paying when you paid the first one off, and so on down the line.
You will have them paid off fairly quickly.
Then you need to get rid of all but 1 card, and change your buying habits.
If you can't pay it off at the end of the month then don't buy it.
Once you figure out what it is really costing you it might make you sick.

[Walt832]

Pay off the big one. Then stay with the small ones= less interest charges.

The higher is debt the higher interest charges is pulled and keeps adding up. Will never see reduction.


The ones that are small use a calculator credit, available online Decide in how many months you want to pay it off. Once you figure out. Set autopay custom payment monthly. Let it pay off by itself. Don't add more debt avoid all cost. Once you are done close all credit cards and leave one open for emergencies only. Like medical or hospital, otherwise don't use it for shopping.

[ShesRad80]

The one with the lowest balance then the next and the next. Keep yourself one credit card. I would personally cut up two of them and just keep the one credit card that best fits your needs or that gives you cash back when you spend at least you get something back. Having one credit card instead of 3 will keep everything easier and consolidated to one place, goodluck!

[Date_a_Snob]

I know this is going to sound like "first world problems" but I dont know which credit card to keep and which to get rid of... Im struggling between two cards - card 1 is with the same bank I also have my chequing account when I make a payment its reflected within 1 business day (this card has a high limit, but reward points and very low cashback rate), card 2 is with a different bank and when I make a payment it can 3 to 5 business days before is processed (this card has a lower limit, but a solid 2% cash back on all categories).

Card 3 I know for sure I dont want to keep as the credit limit is quite low, its with a much smaller national bank and the customer service is not great to just okay (I waiting on the phone for almost 40 minutes just to change from paper to estatements since I couldnt do it online).

[ShesRad80]

no worries we all need help with things sometimes. card 2 sounds like your best bet to be honest

[sage2021]

After I have 5 or more bills to pay each month I get a bill consolidation loan with a low intrest rate. The bank or credit union pays off all of my bills so I
only have one bill to pay with a lower interest rate each month.
It's the only way to go!

[razelove]

Oof, what's the ballpark of how much you're in the hole? Anyway, pay off your highest interest cards first, especially the ones that may be running out of a grace period. Some cards have no, or low interest for an amount of time, then it goes up. Get the debt paid off that's going to keep you in debt, just work towards each one until you get to that point.

Don't let any of them go to collections, if you go to collections and get a judgement against you, the interest can get insane, and far exceed the legal amount of credit or a loan, as now it's a collection of debt by a judgement, every month you aren't paying it being a violation of that judgement.

If you get to that point just get a new name, leave your old life behind and have zero connections to it, that's how you get caught by skip tracers and have to pay the debt before escaping a subpoena or summons running out.

[LiamJHayden]

It depends upon how much you owe and how much you can put towards it each month. Without knowing the specifics I can only offer general advice.

Some people get so buried that renegotiating it might be preferable. In the USA you would be issued a 1099-C or a few, but you if have a negative net worth you avoid paying taxes on those forgiven amounts.

Anyway, here are two main schools of thought:

1. highest interest rate first, minimums on everything else.
2. lowest balance first, minimums on everything else.

Which is better depends upon your exact amounts and situation. If all of the amounts are roughly even, definitely tackle the highest interest rate first. But if there is a huge difference, sometimes it is better to get smaller mounts out of the way just for the encouragement of having paid off something.

[Adam1978]

The one that cost most in interest. If you have them on cards you should really go cold turkey and not spend on anything but living expenses until they are paid off. Never buy anything if you haven't already earned the money. It's one thing to have a mortgage.

[Astarlessnightsky]

Obviously the best method is to not accumulate debt in the first place.

But if you do end up indebted, call the company/bank/... whoever you owe money and explain the situation.

Often you get an offer, where you don't accumulate any more debt and a reasonable monthly amount to pay it off.

[Astarlessnightsky]

The worst you can do is just ignore it and keep the debt increasing.

[bowenw]

Pay off the credit cards first to avoid their high interest charges. If you can't afford to pay them in full, use your line of credit to pay for them as it should have a much lower interest rate. Then focus on paying off the line of credit. Try to always pay off your credit cards in full every month.

[Date_a_Snob]

How many credit cards should you have?

[bowenw]

I like to have a primary one that I use for most things that has a good rewards program, like a VISA. I also have a MasterCard as some places won't accept VISA, plus it's good to have a back up to your main card in case something happens to it.

[Sparkie460]

If they are all the same interest rates, pay off the lowest debt first. Pay more than the minimum payment. If you can, make a double payment. Once that is paid in full work on the second lowest. Put the money that you would use for the one that you paid off towards the second debt.

[Date_a_Snob]

great advice - my struggling is after they are all paid off in figuring out which credit card to keep and which two to cancel (get rid of)

[Sparkie460]

Keep the one with the highest limit

[GoodGuyBreakingBad]

You have 3 credit cards... What I ever learned from in school... Is to make the smallest payment that is accepted by each credit card company also never miss a payment also make sure your credit card payments are paid days or weeks advanced before the due date this will show you are wanting to pay them off... If your payments on credit cards are due the 15th of each month, then you want to make payment on the First or Second of each month.

[Danny_dan92]

Try to do debt consolidation.




If that isn’t an option.




Budget your income. Figure out which of the three has the highest interest rate. Pay that one off first since higher interest percentage means you’ll be paying more money for that card until your balance is zero

[Anonymous]

Pay off the highest one first. Once you pay that off whatever you were paying to your highest card monthly add that to the second card plus whatever you were paying to the 2nd card monthly. Then add all three payments together to go toward your last card.

[Anonymous]

There is only one way to get rid of debt...

If you DON'T do this you will remain in debt!

To get rid (not just pay off) debt you must stop getting debt.
How do you do that? Earn more money than you are currently earning or stop living above your means. Don't listen to any other ideas. It's this simple. Earn more or stop living the way you are.

[SirJohn42]

The best thing is pay them as they are due. Try and make deals with your debtors to get it paid off. Set the money aside and pay them. Make sure you get the immediate bills, rent first.
Then make a budget plan. Set how much you are going to spend on groceries and lastly how much you have for gas, food and set a little budget for you.

As you spend money budget it.
It really helps.
Just male sure you pay the debts on time. No penalties help getting it paid off quickly.

[MrShaun]

You're only speaking of three credit cards but in order to become really debt free, it would be of help to know a little more of your financial situation.

Is those three cards tie only form of debt? What about car or home loan payments?

[MzAsh]

Calculate how much you can put on them each month, and start with the smaller limits. Quit using them until you’re paid up.

[Date_a_Snob]

Good advice. What do you do if they all the same or fairly close amount owing?

[MzAsh]

Then look at interest rates, get any higher ones out of the way first. If those are about the same then it doesn’t matter much. I’d probably spread payments out evenly but put down more than the min amount due. If you only pay the min due, that’s usually only covering interest and it will never get paid off.

[Andres77]

The highest interest rate or the lowest debt card. It’s the easiest of the three and as soon as it’s paid off that money goes to the next one. It’s important to stay out of debt. I’m glad you’re making that move

[Date_a_Snob]

Thanks - quite frankly I blame myself my bank offered me a higher limit on my existing credit card and a line of credit since I've been a good client for years and always pay my bills on time. I should have declined both since my monthly income is not high enough but I was foolish enough to accept.

[Andres77]

banks are like drug dealers...

[nolabels]

I don't recall what is advised, but those criteria are very easily found by doing a quick search.

I would imagine high-interest credit cards would be the most urgent to get rid of.

[Quackthulu2]

Kinda depends on what you are working with. But consolidating debt to minimize interest means you will be paying less in the long run.

[Date_a_Snob]

I have three credit cards with different balances and a line of credit

[Quackthulu2]

Pay off the smallest one first so you don’t have to worry about it anymore.

[Date_a_Snob]

not bad advice

[Quackthulu2]

Just make sure you are hitting your minimum payment on each card each month or it will get worse fast. Easiest way for me to cut down on spending to have more money for other stuff is my groceries. Pasta is cheap as hell and will last a while.

[Date_a_Snob]

im making all my minimum payments and got back my spending significantly

[Date_a_Snob]

I meant cut back on my spending

[Bricealan]

Pay down, which ever debt you have that charges the highest interest.

[Date_a_Snob]

they all charge the same

[TheThingALing]

Best method is to first plug the hole and stop spending more than you make. Then, go after the debt that holds the highest interest rate.

[exitseven]

If you have credit card debt , that should be paid first because the interest is the highest. If you owe the local loan shark money maybe that should be paid first.

[lightbulb27]

listen to a lot of dave ramsey shows or call in.

* Use the card that offers the best rewards points in cash, and pay it off every month.

[OfMiceandMen]

Pay off the credit cards that have the highest interest rate. Start using your line of credit as it is typically the lower interest card.

[Drumlin2001]

Highest interest, even better try to amalgamate into one low rate. If all credit cards, try to get 0% with balance transfers

[Mansearching]

Start with smallest amount of debt. Then build up. Keep the one that charges the least amount of interest.

[Anonymous]

you pay off smallest to biggest. also cut out A LOT of things, starbucks drinks add up (saying this as an example)

[Likes2drive]

The one with the highest interest first because you’ll never get it down and waste your money trying

[RingOfFire]

Pay off the one with the highest interest rates first.

[Anonymous]

Pay them off before they are due. The intrest is what the real killer is.

[DeanFreed]

Some say pay high interest first
Some say pay smaller balances first.. That's snowball

Main thing is to pay them all off
And try to stay out of debt

[Iron_Man]

I don’t have debt I pay my credit cards in cash every month

[Amur8711]

Pay off the one with the highest interest rate first.

Best to not get in debt in the first place tho. Lol

[Josef_89]

In order not to pay a debt, first of all, one should not borrow money.

[Anonymous]

You have to call consolidator. My friend saved so much money in paying off he debt.

[slatyb]

The debt with the highest interest rate.

[Avicenna]

The debt with the highest interest rate.

[In_Trance]

the highest interest is paid first

[Date_a_Snob]

what if several debts have the same interest rate?

[In_Trance]

Then pick the lowest outstanding balance to pay off first and move on

[smahala1991]

Always the one with the lowest balance

[Tiffany1996]

Paying on time helps I found.

[krin_m]

Pay off all the high interest debt first.

[Date_a_Snob]

what if all the debts carry the same high interest rate?

[krin_m]

Then probably look at what the penalties are for late payments and decide based on that.

[krin_m]

DM/Follow me and we can chat more if you want.

[Nominal]

I suggest to get off pay the lowest debt.

[humanearth]

With cash

[EaterPeter]

Snow ball

[Date_a_Snob]

I see you also read Dave Ramsey

[EaterPeter]

I do, read, watch, listen

[CubaPirate]

Debt consolidation

[Anonymous]

High interest to low