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When you have multiple credit cards it can be a little overwhelming deciding which ones you should throw any extra money at to fully maximize paying down your debt. There are 3 main ways you can choose to pay them off, each with their own set of pros and cons. Let’s say you have the following 3 credit cards:
| Amount | Minimum Payment | APR |
| $10,000.00 | $250.00 | 17% |
| $5,000.00 | $140.00 | 24% |
| $2,800.00 | $60.00 | 20% |
Pay Off Your Credit Cards in APR Order
The first, and arguably the most touted, is to put your credit cards in order from largest APR to smallest APR. If you pay off the balances with high APRs first, you can save a ton of money in interest. Most of the time, this is the best way to go. The downside is that you may end up with a card that has a high balance and a high APR and it can seem more daunting and discouraging than paying off a lower balance card. With this method, you would pay off your cards in this order:
| Amount | Minimum Payment | APR |
| $5,000.00 | $140.00 | 24% |
| $2,800.00 | $60.00 | 20% |
| $10,000.00 | $250.00 | 17% |
Pay Off Your Cards In Balance Order
This is usually what people are talking about when they mention the “snowball effect”. With this method, you pay off the balances from lowest to highest and roll your minimum payments into each other. For example, after you pay off $2,800.00, you would add your $60.00 minimum payment to the minimum you pay on the $5,000.00 bringing that minimum to $200.00. Eventually, you would be paying $450.00 towards your last card of $10,000.00. This method is great if you are wanting to lower the number of cards you owe on quickly and can give you a greater sense of accomplishment early on. However, you could end up paying more in interest overall. Your schedule would look like this:
| Amount | Minimum Payment | APR |
| $2,800.00 | $60.00 | 20% |
| $5,000.00 | $200.00 | 24% |
| $10,000.00 | $450.00 | 17% |
Pay Off Your Cards According to Minimum Payment
There is only one reason you would pay your cards off this way and that is if you are so tight on funds that you need to find a way to increase your available monthly cash. With this method, you would pay one of the cards that has a higher, or the highest, minimum payment. If you pay off a $5,000.00 card with a $140.00 minimum payment, then you now have $140.00 a month that you can put towards debt or use for other things you may want or need. You have a little more flexibility. I would not recommend this method unless you have a large sum coming in that you would like to put towards debt and you are strapped for cash on a monthly basis. You would pay off your cards (or at least start to) like this:
| Amount | Minimum Payment | APR |
| $10,000.00 | $250.00 | 17% |
| $5,000.00 | $140.00 | 24% |
| $2,800.00 | $60.00 | 20% |
Combination
If you are like me, you will find that using a combination of these different methods works best for you. I, personally, am expecting a small sum of money to come in at the end of the month and I have already started planning exactly what I want to do with it. In the above scenario, if I were to receive $5,000.00, I would pay off the card worth $5,000.00. This would not only pay off a whole card but also free up $140.00 a month that I could then use towards the $2,800.00 card. If I’m not expecting a large amount to come in, I tend to favor paying off several of my lowest balances first and then switching it up to paying off the highest APR.
There is no hard and fast rule telling you that you MUST pay off your cards a certain way. You have to come up with a method that works best for you and your individual situation. Hopefully, though, these methods will give you some ideas on how to best pay off your cards and get you one step closer to a debt-free life.
