[Barbara]

I noticed that advice was given to pay off the lowest credit card debt first. I thought you were supposed to pay off the card with the highest interest first. Could somebody tell me which is correct? Thank you in advance. I’m learning a lot.

[Melanie]

Weird. Maybe they meant the smallest debt amount owing? Not lowest interest charged? Because paying off a small debt completely would be an easier goal and very satisfying l. Would also motivate you to keep reducing debts after the feeling of an accomplishment

[Sue]

Paying off the smallest amount firs]t is called the snowball method. It’s like rolling a snowball down a hill and it gets bigger as it goes. The point in doing this is that it give you the psychological effect of accomplishment sooner.

Paying off the debt with the bigger interest rate first is called the avalanche method.

It takes a while before you see results if the debt with the bigger interest rate is the bigger amount, but you end up saving money in interest.

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[Kathie]

If you start with the lowest debt credit card first it gives you an accomplished feeling pretty quick.

Then move to the second lowest and add the amount you were paying on the first card to the min on that card and then move to the third.

The “snowball”, amount you pay gets larger with each card.

[Christine]

Dave Ramsey says pay smallest debt first, then add that amount to the next one, after the second is paid off add 1st and second payment amounts to the 3ed.

Snowball effect and seeing them get paid off is motivating to continue. Of course you are also making the required payments on any other bills.

[Michele]

Dave Ramsey suggests paying off the smallest amount first regardless of interest to gain momentum.

Start by listing all of your debts except for your mortgage. Put them in order by balance from smallest to largest—regardless of interest rate. Pay minimum payments on everything but the little one. Attack that one with a vengeance. Once it’s gone, take that payment and put it toward the second-smallest debt, making minimum payments on the rest.

That’s what’s called the debt snowball method, and you’ll use it to knock out your debts one by one.

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[Kayla]

It’s two different methods:

• Smallest debt first is snowball.
• Highest interest first is avalanche.

Each method has pros and cons.

Avalanche saves the most money overall, but snowball allows you to “free up” money.

So if you’re struggling to make ends meet and are living paycheck to paycheck, snowball is going to eliminate one payment, so you’ll have a little extra money to go towards necessities.

[Melissa]

Both are correct. The emotional encouragement of paying off a debt is motivation to tackle the next debt. The sooner you have that fullfilment the stronger you become. By paying off the smallest debt, these emotions are triggered sooner.

You then continue that payment by adding the monies to your next smallest debt payment.

By the time you get to your largest debt your payments will be the minimum and a whole lot more!

Getting debt free is a physical and mostly a mental achievement.

[Kelly]

Either works-

smallest debt first gives greater satisfaction when you pay off quick.

Highest interest first means while first debt may take longer to pay off you will pay less interest over the time therefore saving you money.

[Darla]

If you pay the smallest amount first, it creates a “win” which reinforces a behavioral change.

Ramsey Solutions advocates the snowball method because the debt was created by behavior and lack of control.

If you pay off a $500 card tomorrow or put $500 on a $5000 balance, which makes you feel more accomplished?

Our mind comprehends that we have one less credit card as a larger win.

If you simply put $500 on a $5000 balance, you still have 2 debts to pay down and another 10 plus months to pay off the larger debt.

There is a higher probability that you will give up on the larger balance.

Don’t forget to take a look at: HELP! I have $3000 in debt to my credit cards

[Ellen]

The thought process is to use the amount from the smaller amt to then put towards the bigger debt to get it done faster.

Even better if you can combine them all into a 0% intro rate card and get it paid off before the rate increases.

[Taralyn]

If goal is to pay off the quickest, you pay by interest- high to low. If goal is to open cash flow, pay off lowest balance with biggest payment.

If goal is to give yourself a mental boost and help yourself stay on track, some people recommend paying smallest balance to largest because you see the progress and get a mental boost when the debt is paid.

[Angela]

Neither are wrong. Some people need immediate wins to keep their confidence up and feel progress happening.

Others prefer to pay the higher interest cards first to save on interest over time.

Whatever works for you is right.

[Author]

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