How to eliminate credit card debt—once and for all—is a common topic for personal finance writers. And a popular way to do so, they write, is as follows:
The objective is to eliminate the carry-over balance on one card at a time, until all your cards have a zero balance. The credit card issuers will hate you for doing this, of course. But if you don’t do it, you’ll continue to pay hefty interest charges every month and will owe a balance until you die. Even then, if any relatives or friends are authorized to use your card, those charges will continue until they die.
If you have several credit cards—as most people do—all with carry-over balances every month, select one card and call it Card A. Call the others Card B, Card C, and so on. Then start paying more than the minimum on Card A, while paying at least the minimum on the other cards.
Now here’s where the personal finance writers are divided. Most say that Card A should be the card with the highest interest rate. That’s because—all else being equal—this card accounts for more finance charges than the other cards.
The problem is,”all else” is usually not equal. The carry-over balances are probably all different. Therefore, a few other personal finance writers argue, you should designate the card with the lowest balance and pay that off first. Then you’ll have a card with a zero balance, and anything you charge on it will not be socked with a finance charge—if you pay the balance in full each month.
Naturally, if one particular card has both the highest interest rate and the lowest balance, that’s definitely the card to pay off first.
As soon as you pay off Card A, select another card and start paying off that one, too.
Offshore Pro Group
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