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  #1  
Old 02-09-2011, 04:47 PM
anewton anewton is offline
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Default What Should I Pay Off First

So I have 3 credit cards, a discover card(keeping) sears card(keeping), and a mastercard(going to cancel)

I'm not sure which I should pay off first the Mastercard is maxed out at 7500 and I play to cancel it once its paid off

the Discover has 1500 out of 2000

and the Sears card is 1100 out of 2000

Should I be paying the minimum on the sears and discover and concentrate on getting rid of the Mastercard or should I pay the balance on the smaller cards then work on the larger amount.

Thanks
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  #2  
Old 02-09-2011, 10:27 PM
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DavidBibby DavidBibby is offline
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Default Re: What Should I Pay Off First

Pay the sears card first because it has the lowest balance. Pay as much as you can on sears and pay only the minimum payments on Discover and Mastercard.

Once Sears is gone, (two months from now if you REALLY put forth the effort), you can tackle the Discover card (next lowest balance) while you pay ONLY the minimum on the Mastercard.

Finally.. when Sears and Discover are gone... Put all your energy into paying off the Mastercard.

When you knock off the two small ones first... you are in a better position to take down the big one.

You can do it. In less than 12 months I'd say.
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Old 02-10-2011, 11:20 AM
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RichS RichS is offline
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Default Re: What Should I Pay Off First

Figure out the maximum amount you can pay on all three cards. Then pay the minimums on the Discover and Mastercard. Let's say you have $400 per month to pay on the three cards and the minimum amounts for the Discover and Mastercard total $100 leaving you with $300 to pay on the Sears card. Once you have paid off the Sears card then take that $300 and add it to the Discover card plus the minimum payment and pay off the Discover card. Then pay the full $400 each month on the Mastercard until you pay that off. The key here is to set a maximum amount of money towards all three of the cards and stick with it until you pay them all off.

RichS CFP(r)
www.insimplelanguage.com
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Old 02-23-2011, 07:53 AM
Michelle Michelle is offline
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Default Re: What Should I Pay Off First

I agree with RichS. Its better you check and find out the total amount. Then figure out the minimum one and try to pay it first.
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Old 03-05-2011, 09:10 AM
FinanceOcean FinanceOcean is offline
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Default Re: What Should I Pay Off First

What are the interest rates on the cards? You want to pay off the card with the highest interest rate first.

Let's say you can pay $200 a month. If you have a card at 15%, you will save $2.50 in interest the next month. If you have a card at 12%, you will only save $2.00 the next month in interest charges.

Any interest charges you save will amount to that much more money you can use to pay down your balances in the following month.

Good luck!
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  #6  
Old 03-07-2011, 11:25 AM
NolaP NolaP is offline
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Default Re: What Should I Pay Off First

Good advice from FinanceOcean - try to pay down the card with the highest interest rate first - it will save you money in the end.
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Old 03-25-2011, 12:39 PM
ralphegermain ralphegermain is offline
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Default Re: What Should I Pay Off First

"try to pay down the card with the highest interest rate first - it will save you money in the end. "

Of course this is just one clear and upfront statement. I sure do agree to is.
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Old 03-29-2011, 09:33 AM
jonathanpaul jonathanpaul is offline
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Default Re: What Should I Pay Off First

Quote:
Originally Posted by FinanceOcean View Post
What are the interest rates on the cards? You want to pay off the card with the highest interest rate first.

Let's say you can pay $200 a month. If you have a card at 15%, you will save $2.50 in interest the next month. If you have a card at 12%, you will only save $2.00 the next month in interest charges.

Any interest charges you save will amount to that much more money you can use to pay down your balances in the following month.

Good luck!
Hi FinanceOcean,

Are you saying that you will pay off the debt you have with the credit card that holds the highest interest and settle the balances of the two other cards soon? Or pay in full the high interest card while paying minimums to the 2 other cards?
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Old 04-01-2011, 01:57 PM
littleroc littleroc is offline
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Default Re: What Should I Pay Off First

It depends on whether or not you want to feel like your getting rid of debt fast or slow. If you pay them off smallest to largest, then you'll get rid of each debt faster and move on to the next, but if you do it largest to smallest then it will take a long time to get rid of the first before you move on to the next.
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Old 04-03-2011, 10:22 AM
KatherineLee88 KatherineLee88 is offline
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Default Re: What Should I Pay Off First

Quote:
Originally Posted by littleroc View Post
It depends on whether or not you want to feel like your getting rid of debt fast or slow. If you pay them off smallest to largest, then you'll get rid of each debt faster and move on to the next, but if you do it largest to smallest then it will take a long time to get rid of the first before you move on to the next.
I guess you and I have different perceptions on how we quantify debt.
I quantify debt as a total number of money owed back - whereas the advice you're giving and implying it as paying debt off faster is quantifying debt based on individual loans owed.

So basically you're saying that if someone had:
1. $500 at 4%
2. 2,300 at 10%
3. 5,000 at 29%

They should pay it in the order listed - and they'll pay it off faster using that strategy.

Whereas I think it should go -

1. 5,000 at 29%
2. 2,300 at 10%
3. 500 at 4%

The fastest way to get out of debt is to pay on the debt that has the highest interest rate first -whether it is the largest, smallest, or the MOST GIGANTIC debt you have. This is the FASTEST way to pay off debt.

I guess I'm not psychologically-mislead easily enough to think that paying off the $500 first is the best route to go so I can feel like I'm paying off my debts fast. This mind trick may work for some people, but I would prefer to use common sense instead.
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  #11  
Old 04-04-2011, 11:56 AM
littleroc littleroc is offline
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Default Re: What Should I Pay Off First

Quote:
Originally Posted by KatherineLee88 View Post
I guess you and I have different perceptions on how we quantify debt.
I quantify debt as a total number of money owed back - whereas the advice you're giving and implying it as paying debt off faster is quantifying debt based on individual loans owed.

So basically you're saying that if someone had:
1. $500 at 4%
2. 2,300 at 10%
3. 5,000 at 29%

They should pay it in the order listed - and they'll pay it off faster using that strategy.

Whereas I think it should go -

1. 5,000 at 29%
2. 2,300 at 10%
3. 500 at 4%

The fastest way to get out of debt is to pay on the debt that has the highest interest rate first -whether it is the largest, smallest, or the MOST GIGANTIC debt you have. This is the FASTEST way to pay off debt.

I guess I'm not psychologically-mislead easily enough to think that paying off the $500 first is the best route to go so I can feel like I'm paying off my debts fast. This mind trick may work for some people, but I would prefer to use common sense instead.
Here is my theory behind the snowball method working for people better and maybe not using the "Fastest way" wording because it isn't exactly true, but more of a feeling you get from doing it this way. Imagine someone who is already afraid and nervous because they have all of this debt. To someone like that if they went with your method it would seem like eternity until that pay off the 5k and might even give up. If they were to start with the smallest debt of $500, they would be able to knock that one off very quickly and it would feel like a quick win, which would motivate them to keep going. Then they would move on to the next and because they could apply a little more money they would conquer the next. It's all about the motivation factor and not the interest rates and debt size. I hope that explains it better? Either method will pay off the debt. I used it and it worked great.
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Old 04-06-2011, 11:52 AM
khosta khosta is offline
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Default Re: What Should I Pay Off First

Why are you keeping the Discover and not eh Mastercard?? Discover really isn't excepted everywhere... which, I guess, could be a good thing!! Then you don't spend as much!!
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  #13  
Old 04-15-2011, 05:35 PM
ronny_todgers ronny_todgers is offline
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Default Re: What Should I Pay Off First

Quote:
Originally Posted by littleroc View Post
Here is my theory behind the snowball method working for people better and maybe not using the "Fastest way" wording because it isn't exactly true, but more of a feeling you get from doing it this way. Imagine someone who is already afraid and nervous because they have all of this debt. To someone like that if they went with your method it would seem like eternity until that pay off the 5k and might even give up. If they were to start with the smallest debt of $500, they would be able to knock that one off very quickly and it would feel like a quick win, which would motivate them to keep going. Then they would move on to the next and because they could apply a little more money they would conquer the next. It's all about the motivation factor and not the interest rates and debt size. I hope that explains it better? Either method will pay off the debt. I used it and it worked great.
While there is a role for Psychology here, you have to make some effort to optimise your behaviour when you are dealing with money. Its not just that it might not be fastest - in teh example three debts you would end up spending way more money which you could have spent on something you actually wanted.

Always pay the debt that is costing you most off first.
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  #14  
Old 04-18-2011, 12:56 PM
littleroc littleroc is offline
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Default Re: What Should I Pay Off First

Quote:
Originally Posted by ronny_todgers View Post
While there is a role for Psychology here, you have to make some effort to optimise your behaviour when you are dealing with money. Its not just that it might not be fastest - in teh example three debts you would end up spending way more money which you could have spent on something you actually wanted.

Always pay the debt that is costing you most off first.
You can do your way, but the snowball method is what keeps people on track and your way IMO a lot of people get frustrated and quit. As for interest goes, unless you plan on keeping the debt for many years, who cares. To me it's worth the progress.
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  #15  
Old 04-20-2011, 05:25 PM
FinancialGuy FinancialGuy is offline
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Default Re: What Should I Pay Off First

I work for a consumer credit counseling agency and the credit counselors always recommend to pay of the CC that has the highest interest rate ASAP.

Last edited by DavidBibby; 04-20-2011 at 10:18 PM.
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