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Tausha is looking for some advice on paying off credit card debt as fast as possible. Here’s what assistant branch manager Angie Heiden recommends.
Tausha: If I have 2 credit cards that are maxed, one is $12,000 with a 9% interest rate and the other is $7,000 with a 25% interest rate, would it be better to pay off the card with lower rate first and then transfer the balance from the higher-rate card to the lower-rate card?
Angie: There are 2 common strategies for paying down debt: the debt snowball and the debt avalanche.
With both options, you pay the minimum balance on all but 1 debt and pay as much as possible toward that debt until it’s paid off. Then you add the amount you paid on that debt to the amount you pay on your next debt until that one is paid off. Repeat the process until all debts are paid.
Made popular by financial author and radio host Dave Ramsey, the debt snowball involves paying off the smallest debt first to motivate you to continue tackling your debt.
The debt avalanche involves paying the highest-interest rate debt first to save you the most money on interest.
Since your 25% interest rate credit card is both your smallest and highest-interest rate debt, I recommend you pay as much as possible toward that one, while making minimum payments on the 9% interest rate card, until the first card is paid off. Then put both payments toward your second card to knock out that debt faster.
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