When paying CC bills which is better?

**FrugalMomof3** · 01-25-2006, 07:59 PM

I want to pay down my credit card bills, and will soon have around $2500 to put towards credit cards so here goes...

My smallest CC bill is $80 my largest is $2000, I have a few so here's a breakdown... smallest to largest:

$80 - Macy's
$160 Target
$180 Victoria's Secret
$180 HSBC
$200 Old Navy
$270 Best Buy
$280 PayPal Buyer Credit
$600 Capital One's (2 cards each with a $300 balance)
$400 Walmart
$975 Orchard Bank
$2000 Circuit City

Which is best to pay off first, all the smaller ones and get them out of the way and when it comes time to pay the larger one's to put the min. payment I was to make towards the smaller one's towards the larger ones? OR Pay off the larger one's and deal with the smaller ones?

Here's what I want to do: Pay off $2500 of the smaller ones those would be:
$80 - Macy's
$160 Target
$180 Victoria's Secret
$180 HSBC
$200 Old Navy
$270 Best Buy
$280 PayPal Buyer Credit
$600 Capital One's (2 cards each with a $300 balance)
$400 Walmart

= $2350

Then only have:
$975 Orchard Bank
$2000 Circuit City

Min. payments on the above 2 are $35 + $17 = $52
and min. payments on the ones I would pay off are around $15 each = $135/mo, so even if I put $15 extra towards the 2 leftover that would bring my monthly payments down quite a bit, since I am not paying ALL of them anymore and only 2.

Once income tax comes I will pay them off, but would be nice to have a lower balance when that time comes and extra money to put towards our EF and savings.

What are your thoughts, they are appreciated.

guest7 · 01-25-2006, 08:11 PM

Definitely paying off the highest number of cc's as you can. Just as you have listed totals $2350. Put the difference $150 and what your usual payments would have been toward one of the remaining cc.preferably the higher interest. Finally, make as alarge a payment as you can on the last cc.
Snowball all the payments toward the higher interest cc (of the 2 remain) until paid off... then snowball the payments to the final cc.
You'll be debt free in no time. At the same time, you should be putting aside a little extra for your EF. So that you won't need to use the cc.
Put the cc's AWAY! see posts on the envelope system.

**FrugalMomof3** · 01-25-2006, 08:12 PM

Thanks for the advice, I surely will do it.

I am excited that I have come into the money and am able to pay off most of the CC's, it's exciting!

**Mojjo** · 01-25-2006, 08:59 PM

I would agree that in this case it's quantity over quality

**homesteadmamma** · 01-25-2006, 09:10 PM

For me it would depend on what interest you are paying on the largest one.

If it was me I would pay off the following:

$2000 - Circuit city
$80 - Macy
$160 - Target
$180 - Victoria Secret

$80 remaining to HSBC

Then I would snowball all 4 of those right on HSBC and the other remaining ones.

For our family, we always did it opposite what most everyone else does. We went for the highest which had the highest rate of interest and was the highest payment as well. When we got that one paid off, we snowballed that payment on to the next one.

**Valerie in WA** · 01-25-2006, 09:18 PM

Tracy,

I think your plan to pay off the Macy's through Walmart bills is great.

That leaves you $975 on Orchard Bank and $2000 at Circuit City. You said the minimum payments $35 & $17. I assume that the $35 is for the Circuit City (the larger balance) and the $17 for Orchard. IF both those cards at 0% interest (which I'm sure they are not - or you would have mentioned it), so if they were, and you made the minimum payments, it would take you 5 years to pay them off (actually, it will be longer because of interest).

You then said:

even if I put $15 extra towards the 2 leftover that would bring my monthly payments down quite a bit.

If you do this and pay a total of $67/month ($35 + $17 + $15) toward the two debts ($2975), it will still take you 4 years, EVEN WITH 0% interest. (With interest it will take longer.)

So, forgive my poor memory: are you having trouble making the minimum payments on all 11 cards? If so, I think your plan is okay. BUT if you are making those payments comfortably, PLEASE 'snowball' the WHOLE $135 a month into the Orchard & Circuit City credit cards. You will be paying a total of $187/month ($135 + $17 + $35). Again using our 0% example, this would result in a payoff time of only 15 months (longer with interest). That's a big difference.

I hope I haven't confused you with the 0% example, it's just a quick way to make comparisons. Besides I don't know your interest rates.

Ask me for clarification if you need.

**FrugalMomof3** · 01-25-2006, 09:30 PM

I am not sure of the interest rates at this point but I think they are both at 19% which isn't that great BUT once income tax comes they will be paid off as well.

As for having trouble making payments on all 11, well yes... I pay the minimum and sometimes $5 more but that's only when I sell a few items on ebay and have the extra cash. That's why I figured it would be better for me to get rid of as many as I can saving me approx. $135 a month and even adding $15 to each card extra per month I still save $105 a month, in the long run I get more paid off and out of my way and save more doing so.

If I paid the two highest ones $2975 I would be saving only $52 per month instead of $105 or $135 if paying just the min. balance.

Money wise for me I am going to pay off 9 of them and put more to the other 2 and when income tax comes they will be paid off leaving me with no CC debt, the only debt I would have are the 2 mortgages, so basically saving me almost $200 a month.

Any imputs? They are appreciated.

**Valerie in WA** · 01-25-2006, 09:46 PM

One more clarification: you have $2500 to pay bills now, AND you'll be getting another $3000 for your tax return?

If so, I think you're in pretty good shape.

guest7 · 01-26-2006, 07:18 AM

Valerie, tracey will only have $2500 with income tax.

**ecgsmama** · 01-26-2006, 08:28 AM

would be to cut them up once you've paid them off - in whatever order you'd like.

**FrugalMomof3** · 01-26-2006, 08:28 AM

Actually I will have $4800 but hubby has some things he wants to pay off as well so we usually split it down the middle, but we both agreed that I would pay those last 2 and he will stick the rest on his cards.

**missmollymayhem** · 01-26-2006, 09:37 AM

Try to pay the ones with the highest interst rates first, probably your store cards and paypal. Then.... close the accounts. That way the temptation won't be there.