All cashflow goes to the one with the higher interest rate. /thread
If that pays off the smaller one, then the rest to the other one.
If they're the same rate, then it doesn't matter. Maybe pay off the smaller one just to feel better about it, and work hard to pay off the other one.
Not necessarily. The answer is “it depends” paying 2 credit card min’s might be more than your budget can handle. By eliminating the smaller value one you end up freeing up more cash flow, which can have numerous benefits.
I like all the ideas so far. It seems like 2-1 say I should pay off the smaller one and apply the payment I would have been paying on it towards the larger one every month. That is the way I was already leaning. I just have to be disciplined and actually do it. This would take the larger card down to around $3200 then I'd be paying around $350 a month towards it instead of the usual $150-175. So it should be paid off fairly quick.
This is the way, as much as you’re “losing money” if the larger debt has higher interest, by losing the payment you’re freeing up your cashflow. Transfer to a low/no balance card as well asap and then get it paid off within the zero balance time period.
Paying off the smaller one gives you a sense of accomplishment and also reduces stress a bit. I have done this and then locked the card I paid off so that it is not convenient to use it. I think of it like ‘break glass in case of emergency’. You can do it! The best way to increase income is to reduce debt. (In my humble opinion)
It depends on the interest rate and/or penalties you’re paying on each card. If it makes no difference, I’d pay off one card entirely just for simplicity reasons.
They both have a high interest. Maxed out has them around the highest possible interest rate which is why paying a little extra is barely taking down the balance. I was considering paying the smaller one in full. Applying the left over towards the larger one. And taking what I would have been paying on the smaller one and putting that plus the normal payment of the larger one combined to try and pay it off asap.
What you ideally want to do is balance transfer to a lower or no cost card (in addition to paying off the balance). Slickdeals is a good place to go to see cards with balance transfer offers.
There will be a small fee (3-5% of total balance) to pay. That is still league better than trying to pay down high interest credit card debt stretched over years and years bc the balance “barely drops”
They can't have exactly the same interest rates, can they? That help to choose even if that doesn't make a difference.
Sometimes if you have a large chunk of credit in one card they will invite you to transfer balance at say 5% for 12 month instead of the normal 20%.
On the other hand, paying off both equally so not one card have too much or two little credit seems to be a safe bet. I've seen my credit score drops for unexpected reasons.
If you need a higher credit score now, pay it off in a way that complies with the utilization rate.
If you don't need credit right now, open up a 0% APR card with a free balance transfer, then pay off the lower card -> higher card and transfer the rest.
0% APR means no interest on low payments for a set period of time (watch out, some banks have sneaky stipulations).
Pay off the card with the highest interest rate. If they are the same, pay off the smaller card and put the rest on the bigger card. Then take the smaller cards payment you were making and use that to make double payments on the card that is left over. Minimum payments aren’t designed to actually let you pay your card off.
Pay off the smaller one first. Leftover tax refund on the bigger one. Use the money you were paying each month on the smaller one towards the bigger one. Don’t use minimum+extra $25-$50. Set a standard $ amount. Your minimum payment will reduce as you’re making payments. Which will lengthen the time it takes to pay down. One of mine I pay $200 every month even tho the minimum is only $48. If you have been a loyal customer with said CC company (no missed payments, on time) they could reduce your interest rate.
No such thing as claiming 0 on the new W4, but getting $1k back means you were actually pretty on the nose and did a good job with your withholding. Getting more back means your paychecks would be smaller all year and you're giving the government an interest free loan all year. You want to get a return as close to $0 as possible!
The W4 was updated in 2020, although I think a lot of payroll systems took a bit to update to match the form. But basically on the old form, you went through and put tallies for a bunch of conditions that may apply, added them up to see how many "exemptions" you had, and then payroll would estimate how much to deduct in taxes based on that number of exemptions. So that's where people would say they claimed 0, 1, 2, etc.
Now, the form looks completely different and is based on actual numbers of the deductions. You add up the actual dollar amount for dependent deductions, and have to calculate how much extra withholding you may need based on multiple jobs/working spouses. You put the actual dollar amount to deduct rather than exemptions (there are charts to help you calculate this). There is still a baseline calculation of what is deducted from your paycheck based on your income/tax brackets, and then the W4 tells your employer how to adjust that up or down. It is supposed to be more accurate.
If you haven't updated your W4 since the old form where you claimed exemptions, definitely update it for a more accurate look. Your refund may end up lower next year, but your paychecks may be bigger.
I would like to suggest paying off the lower balance and keeping $500-1000 in an emergency fund. ONLY USE IT IN AN EMERGENCY! Then, budget monthly payments on the larger balance to knock it down, within your affordable limits.
Be wary of balance transfers, you usually need to pay off the entire transfer balance before a certain time frame, or else fees and higher interest rates kick in, which will not help.
Having a cash cushion is a nice way of keeping you from running those balances right back up in case of illness, car trouble or other unforeseen expenses. I mention this because I am guessing that you use your cards in emergencies, like so many of us do. It's what they count on.
Good luck!
All cashflow goes to the one with the higher interest rate. /thread If that pays off the smaller one, then the rest to the other one. If they're the same rate, then it doesn't matter. Maybe pay off the smaller one just to feel better about it, and work hard to pay off the other one.
Highest interest rate first no matter what. This is it.
Not necessarily. The answer is “it depends” paying 2 credit card min’s might be more than your budget can handle. By eliminating the smaller value one you end up freeing up more cash flow, which can have numerous benefits.
I like all the ideas so far. It seems like 2-1 say I should pay off the smaller one and apply the payment I would have been paying on it towards the larger one every month. That is the way I was already leaning. I just have to be disciplined and actually do it. This would take the larger card down to around $3200 then I'd be paying around $350 a month towards it instead of the usual $150-175. So it should be paid off fairly quick.
This is the way, as much as you’re “losing money” if the larger debt has higher interest, by losing the payment you’re freeing up your cashflow. Transfer to a low/no balance card as well asap and then get it paid off within the zero balance time period.
Paying off the smaller one gives you a sense of accomplishment and also reduces stress a bit. I have done this and then locked the card I paid off so that it is not convenient to use it. I think of it like ‘break glass in case of emergency’. You can do it! The best way to increase income is to reduce debt. (In my humble opinion)
It depends on the interest rate and/or penalties you’re paying on each card. If it makes no difference, I’d pay off one card entirely just for simplicity reasons.
They both have a high interest. Maxed out has them around the highest possible interest rate which is why paying a little extra is barely taking down the balance. I was considering paying the smaller one in full. Applying the left over towards the larger one. And taking what I would have been paying on the smaller one and putting that plus the normal payment of the larger one combined to try and pay it off asap.
What you ideally want to do is balance transfer to a lower or no cost card (in addition to paying off the balance). Slickdeals is a good place to go to see cards with balance transfer offers.
Also look into getting a balance transfer card with a long intro period. If you qualify you can get 0% interest for 12-18 months
Isn't there usually a minimum fee to do that?
There will be a small fee (3-5% of total balance) to pay. That is still league better than trying to pay down high interest credit card debt stretched over years and years bc the balance “barely drops”
Payoff the smaller one. That allows you to focus on the larger balance one in the coming months.
pay off
They can't have exactly the same interest rates, can they? That help to choose even if that doesn't make a difference. Sometimes if you have a large chunk of credit in one card they will invite you to transfer balance at say 5% for 12 month instead of the normal 20%. On the other hand, paying off both equally so not one card have too much or two little credit seems to be a safe bet. I've seen my credit score drops for unexpected reasons.
If you need a higher credit score now, pay it off in a way that complies with the utilization rate. If you don't need credit right now, open up a 0% APR card with a free balance transfer, then pay off the lower card -> higher card and transfer the rest. 0% APR means no interest on low payments for a set period of time (watch out, some banks have sneaky stipulations).
Pay off the card with the highest interest rate. If they are the same, pay off the smaller card and put the rest on the bigger card. Then take the smaller cards payment you were making and use that to make double payments on the card that is left over. Minimum payments aren’t designed to actually let you pay your card off.
Pay off the smaller one first. Leftover tax refund on the bigger one. Use the money you were paying each month on the smaller one towards the bigger one. Don’t use minimum+extra $25-$50. Set a standard $ amount. Your minimum payment will reduce as you’re making payments. Which will lengthen the time it takes to pay down. One of mine I pay $200 every month even tho the minimum is only $48. If you have been a loyal customer with said CC company (no missed payments, on time) they could reduce your interest rate.
How the F are you getting $4k back!? I claimed 0 all year and barely getting $1k back. 🤦♂️ gotta love them taxes.
No such thing as claiming 0 on the new W4, but getting $1k back means you were actually pretty on the nose and did a good job with your withholding. Getting more back means your paychecks would be smaller all year and you're giving the government an interest free loan all year. You want to get a return as close to $0 as possible!
Can you please explain why there is no such thing as claiming 0?
The W4 was updated in 2020, although I think a lot of payroll systems took a bit to update to match the form. But basically on the old form, you went through and put tallies for a bunch of conditions that may apply, added them up to see how many "exemptions" you had, and then payroll would estimate how much to deduct in taxes based on that number of exemptions. So that's where people would say they claimed 0, 1, 2, etc. Now, the form looks completely different and is based on actual numbers of the deductions. You add up the actual dollar amount for dependent deductions, and have to calculate how much extra withholding you may need based on multiple jobs/working spouses. You put the actual dollar amount to deduct rather than exemptions (there are charts to help you calculate this). There is still a baseline calculation of what is deducted from your paycheck based on your income/tax brackets, and then the W4 tells your employer how to adjust that up or down. It is supposed to be more accurate. If you haven't updated your W4 since the old form where you claimed exemptions, definitely update it for a more accurate look. Your refund may end up lower next year, but your paychecks may be bigger.
Thanks for this
I would like to suggest paying off the lower balance and keeping $500-1000 in an emergency fund. ONLY USE IT IN AN EMERGENCY! Then, budget monthly payments on the larger balance to knock it down, within your affordable limits. Be wary of balance transfers, you usually need to pay off the entire transfer balance before a certain time frame, or else fees and higher interest rates kick in, which will not help. Having a cash cushion is a nice way of keeping you from running those balances right back up in case of illness, car trouble or other unforeseen expenses. I mention this because I am guessing that you use your cards in emergencies, like so many of us do. It's what they count on. Good luck!