Two credits cards totaling $3600 and want to know which one should I pay off first (increase, balance)

[Sneakerfreak]

Pay the smallest balance off first. Get that easy kill out the way so you can turn your attention to the bigger monster facing you.

[maat55]

Depending on how fast you can payoff both, getting a personal bank loan(2700)to pay them off would likely lower your cost. This is provided you seriously intend to start paying in full each month for any further use. More important than how you use this 800 is starting to pay in full from here on out.

[CoastalMaineiac]

Originally Posted by nfceast

My Discover Card balance is $2885.00 with a interest charge of 16.24%. My Amex Card balance $714.00 with a interest charge of 12.74%.

I have about $800 dollars coming my way in 5 weeks and wanted to know should I end the balance for Amex and then start working on the Discover Card balance? Or do I send the $800 to Discover Card since it has the highest interest?


Thanks

Before you think about paying off the cards, how is your emergency fund looking? If you have anything less than $2,000 saved for emergencies, I would be more inclined toward keeping the $800.

If you don't mind my asking, what did you buy on these cards to amount to so much?

[Pitt Chick]

Originally Posted by CoastalMaineiac

If you don't mind my asking, what did you buy on these cards to amount to so much?

OP said that in post #5..

Originally Posted by nfceast

Probably that $2885 debt since that is the card I had to live off when I lost my job.

[CoastalMaineiac]

Originally Posted by Pitt Chick

OP said that in post #5..

Ah, okay, I must've glossed over that one.

[galaxyhi]

nfceast:

AS mentioned there are many ways to pay off:

1} pay off small balance first, then pay big balance

2} pay off higher interest charge first, then lower

3} pay down the larger open credit line so you have it for emergencies, then pay off small balance

4} pay down both at the same time...

There are probably a dozen more ways, but these are the basic 3 or 4.

Here's what I did in that situation, "snowballed it":

1} paid down/off the smaller balance FIRST. let's say minimum payment is $25, and I can pay $30 until paid off.

2} then added the $30 to the minimum payment of the bigger one {let's say$50,and I typically can pay $60}, and paid down the total of $90 {$30+$60} to the higher interest card.

3} if/when I could I made it rounded to the nearest quarter hundred dollar mark, making a $100 payment.

4} when I had extra $$$ I added it to it, even if it wasn't payment time, I'd call up and use the computer payment thingy and make the extra payment, reducing my interest outgo further, and reducing the balance quicker.

That worked for me on so many levels.

1} it gave me a "thrill" to pay off the lower card
2] freed up the total limit on the paid off card
3} allowed me to pay MORE than I was on the higher card reducing it's balance quicker, which reduce the interest outlay.
4} cleared the higher interest balance in NO TIME.

I also started putting $5/week into a savings account for emergency fund instead of paying it as extra above the $100 on the credit card to establish and build an emergency fund. Then when the cards were paid opff, I put the whole $100/m into the Efund savings account until I had $2500, enough to open a Money Market account at a higher interest rate paid to me at the Credit Union.


But that worked for me, might not for you.

YOu could ALSO take a second job moonlighting at McD's a few nights or weekends to pay it off FASTER, ADN THEN keep workign until you have a solid E fund established.......

Best of luck as you make your decision.

[nfceast]

Originally Posted by CoastalMaineiac

Before you think about paying off the cards, how is your emergency fund looking? If you have anything less than $2,000 saved for emergencies, I would be more inclined toward keeping the $800.

If you don't mind my asking, what did you buy on these cards to amount to so much?

I had to live off the discover card a couple of years ago when I was fired and ineligible for unemployment.

[CoastalMaineiac]

Originally Posted by nfceast

I had to live off the discover card a couple of years ago when I was fired and ineligible for unemployment.

Ah, sorry to bring up bad memories.I'd still recommend prioritizing your emergency fund if you don't have at least a couple grand stashed away.

[nfceast]

Originally Posted by CoastalMaineiac

Ah, sorry to bring up bad memories.I'd still recommend prioritizing your emergency fund if you don't have at least a couple grand stashed away.

I was able to get the emergency fund $1500.00 and now I want to focus on elinintibg debt between now and 6/30

I couldn't do it last year because my apt building was sold and had to find a new place to live

[Kgryfon]

There is another factor, and that has to do with whether you care about increasing your credit score. A large part of your credit score is based on your credit utilization. If you get the account balances at less than 30% of the available credit it will increase your credit score. Take your balance and divide it by your credit limit to get your credit utilization %. If you can get one (or both) below 30% by applying the $800 appropriately, and your credit score is important to you right now (or in the near future - for example if you are looking to buy a car soon), you might want to do this. A higher credit score usually means you pay a lower interest rate on any new credit. The lower the credit utilization score, the higher the overall credit score. This is also why you don't close paid off credit cards - keeping them active with a zero (or small) balance does two things - decreases your credit utilization % and increases your credit history period (how many years you have had your active credit accounts). Both are significant factors in calculating your overall credit score.


If this is not a concern at this time, see above suggestions and take your pick. The difference in the actual account of interest to be paid on these balances at these rates is not really material if you are going to be paying them off soon, anyway.