The first financial advisor will tell you to pay off the lowest balance and work your way up from there. The benefit of this approach is that you will likely feel energized by paying off your balance and will be more likely to carry your momentum forward. Another benefit is that you will have less bills to worry about, and therefore will be less likely to miss or make late payments. However, this approach will not work if you have the type of personality that is motivated by this type of progress.
The second option is to pay off the card with the highest interest rate first and go down from there. This approach offers you the biggest “bang for your buck.” However, if all your cards have identical interest rates this approach is probably not the best one for you as you’re not going to save any money in the long run.
The third option is to pay off your debt strategically. You should be using 30 percent or less of the available balance of any card at any given time. Paying off your cards so that they are below this limit has significant advantages for your credit score. However, if your cards have equally high limits this approach does not provide any significant advantage to you as a consumer.
The final option we’ll discuss here is the possibility of getting a home equity loan.
If you own your home and have built some equity in it through paying down your mortgage, there is a significant advantage to this approach. You are likely trading a high interest rate in your credit cards for a lower interest rate in your home equity loan. Another advantage to this approach is that you can itemize your home equity loan on your taxes, giving you a bigger return.