Which Credit Card to Pay Off First? Keys to Debt Management

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Contributor, Benzinga
November 28, 2023

Credit card debt can feel stressful. You may have multiple balances that accrue interest and late fees. Creating a plan to get out of credit card debt and knowing the steps can make the process feel more manageable. You can also see tangible results if you track your money and make better decisions. If you have several credit cards with balances, this guide will help you decide which credit card you should pay off first.

Factors to Consider When Deciding Which Credit Card to Pay Off First

Before you start paying off credit cards, it’s important to take a step back and assess the following factors for each credit card.

1. Interest Rates

A higher interest rate means your debt accumulates faster. A high-interest rate can make debt feel unmanageable, but if you prioritize credit cards with high rates, you may get out of debt sooner.

2. Minimum Required Payments

Some credit cards have small minimum payments, making it easier to avoid late fees and hurting your credit score. Check your credit cards to see what the minimum requirement payments are. It may be a good idea to address the minimum required payment amount for each card before focusing on a specific credit card.

3. Credit Score Impact

Making the minimum payment on every card will help your credit score even if this strategy doesn’t get you out of debt. However, if you let your balances grow, they can hurt your credit utilization ratio. Credit utilization rate makes up 30% of your credit score, and this metric improves if you pay off your credit lines.

4. Penalty Fees

Some credit cards have high penalty fees, which makes it more rewarding to pay them off. Some credit cards have no late fees, which may make them less urgent than a card that has fees.

5. Introductory Offers (0% APR for a limited time)

If you have a credit card with 0% APR for a limited time, you don’t have to pay it off right away. You can focus on credit cards with high-interest rates so they do not compound. However, you should aim to resolve those debts before the introductory rate goes away.

6. Rewards and Benefits

Some credit cards have rewards and benefits that can make repayment easier. If you have racked up any points that you can convert into cash at a reasonable rate, it may make sense to make those conversions. You can also prioritize your spending with a credit card that offers more cashback for every purchase.

Balances vs. Interest Rates: Prioritizing Repayment

If you have explored debt repayment enough, you may have come across two popular strategies: debt snowball and debt avalanche. The debt snowball method involves starting with your lowest balance. Once you pay off that balance, you move to your next lowest balance. The idea behind the snowball method is to build momentum that helps you cover your other credit card debts.

The debt avalanche strategy prioritizes interest rates instead of balances. You can start with the low balance, but why start there if you have an introductory 0% APR on that balance? You can limit debt compounding more effectively if you target your credit card balances with the highest interest rates. Getting rid of expensive debt first makes it easier to get rid of smaller financial obligations in the future. However, if you need a quick win on your debt repayment journey, the debt snowball method can be a starting point.

Why Is It Important to Pay Off Your Credit Card on Time?

It is important to stay on top of your bills and pay your credit cards on time. Here are some of the reasons why you should make your payments before the due date.

Maintain a Good Credit Score

Your payment history makes up 35% of your credit score. On-time payments will improve your score and help you qualify for better loans. You will need a good score to get the best terms and highest loan amounts for mortgages and auto loans.

Avoid Late Payment Fees

Staying on top of your credit card debt can help you avoid late fees. These fees can add up quickly, especially if you have balances on multiple credit cards.

Prevent Increase in Interest Rates

Credit card companies can increase your interest rate if you miss payments. Credit card issuers generally cannot raise your interest rate for the first 12 months, but late payments give them enough leeway to raise your rate during those 12 months. After the initial 12 months, credit card issuers have more opportunities to raise interest rates. Don’t give them opportunities to do so.

Get Promotional Offers and Benefits

Credit card companies may extend promotional offers and benefits if you stay on top of your payments. These offers and benefits can help you save money and get extra perks.

Establish Responsible Financial Habits

Prioritizing debt repayment will help you establish better financial habits. You will be more likely to stay on top of expenses, only spend what is necessary and save more money.

How to Repay Credit Card Debt Faster

It is possible to get out of credit card debt sooner than you anticipate. Check out these strategies that can help you repay or pay off debt faster and regain control of your finances.

1. Assess Your Debt

It’s important to get an entire overview of your debt before you create a plan. Knowing how much you owe, the interest rates on each card and the minimum payments can give you a better idea of how to prioritize repayment.

2. Create a Budget

Review your income and expenses to create an optimal budget. You should create a third category in your budget that accounts for saving money. Prioritizing saving can help you repay debt faster and instill good money habits. Trimming discretionary spending while you still have debt can help you become debt-free sooner. Carefully track your expenses to make sure you only spend on necessary items.

3. Prioritize Repayment Strategy

You can choose the debt payoff strategy that works for you best. The debt snowball prioritizes smaller balances and can help with building momentum. The debt avalanche strategy focuses on high-interest debt and can save you more money in the long run.

4. Cut Expenses and Increase Income

Reviewing previous credit card statements can reveal unused subscriptions and unnecessary expenses. Trimming these expenses and increasing your income with a side hustle or career advancement can help you get out of credit card debt.

5. Negotiate Lower Interest Rates

Some credit card issuers will agree to lower your interest rate if you negotiate with them. You can explain to the credit card company that you have been working on your financial habits and want to pay off the debt quickly. Showcasing how you can get out of debt and stay on top of your finances in the future can help you score a lower interest rate. Not all credit card issuers will fulfill your request, but you never know if you don’t ask. When negotiating credit card debt, make sure you are courteous in your conversations since a representative will decide whether to lower your rate or not.

6. Make Extra Payments

Do not stop at the minimum monthly payment if you have additional funds. Making extra payments will reduce your debt before the next interest increase. You can use extra money from side hustles, tax refunds, work bonuses and other surprises to trim your credit card debt. If you don't let up on the extra payments, you will become debt-free sooner.

7. Consider Balance Transfers or Consolidation

Using a balance transfer credit card or getting a debt consolidation loan can be a good option to take the same debt and receive a lower interest charge. Getting a lower interest rate will reduce the monthly payments.

With a debt consolidation loan, you can extend the duration to make the payments more manageable. While consumers who apply for a balance transfer card can take advantage of an introductory rate and pay off debt sooner.

8. Avoid Taking on New Debt

You don’t want to take on additional debt while working hard to pay off your credit card debt. Every new debt stretches your resources thin and can increase your financial stress. You won’t be in credit card debt forever, and prioritizing repayment will get you out sooner. Once you are debt-free, you can consider taking on new debt that is productive.

9. Stay Motivated and Track Progress

Celebrate all of your small wins and track your progress across your credit card balances. It’s important to acknowledge your progress along the journey because it can take a while to achieve your goal. When the going gets tough, visualize your long-term goals of becoming debt-free and financially independent. Those long-term goals can inspire you to take the right actions that get you one step closer.

10. Seek Professional Advice if Needed

Some people need professional help or an accountability buddy to get out of credit card debt. You can speak with a professional, such as a financial advisor, to receive personalized guidance and create a customized debt payoff plan. Some professionals negotiate with creditors on your behalf to secure lower interest rates and better repayment terms.

Get on Top of Your Credit Card Debt

Credit card debt can grow if you aren’t careful, but staying on top of it can make you debt-free in the future. Once you get out of credit card debt, you will have developed financial habits that can keep you out of debt going forward. It can take a while to get out of credit card debt, but a disciplined approach can bring you closer with each day that passes.

Frequently Asked Questions


How does the interest rate impact the order of credit card payments?


Some people use the debt avalanche method to pay off their debt. This approach involves paying off credit card debt with the highest interest rates to minimize debt compounding.


What are the consequences of missing credit card payments?


Missing credit card payments can result in interest and fees. Missed payments can also hurt your credit score, which will impact your ability to get loans.


Can I consolidate credit card debt to simplify repayment?


You can consolidate your credit card debt into a personal loan to simplify repayment.


Is it advisable to close a credit card account once it has been fully paid off?

It depends on the individual’s financial goals and circumstances. Closing a credit card account that has been fully paid off can have both positive and negative impacts on a person’s credit score. On one hand, closing the account can reduce the available credit limit, which may increase the credit utilization ratio and potentially lower the credit score.
On the other hand, closing the account can also prevent the temptation of overspending and accumulating more debt. Ultimately, it is advisable to consider factors such as the length of credit history, the impact on credit utilization, and personal financial discipline before deciding to close a credit card account. Consulting with a financial advisor may also be helpful in making an informed decision.
Marc Guberti

About Marc Guberti

Marc Guberti is a personal finance writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.