Which bills to attack first?

[Trail-Runner]

I'm working on widdling down a few stupid retail cards I had from about a year ago.

They both have approx $1000 left to pay off on them, the weird thing is, one has 27% interest rate and the other a 22%. The one with the lower interest rate has a higher monthly minimum.

I just read Suze Ormans advice that I should attack the highest rate first as it would be better in the long run, but I keep thinking I want to get that high minimum out of the way first in case i need $$$ for an emergency.

To make things more complex, I got this iphone app that calculates all my debts and uses the snowball theory to get me out of debt. It says I can either pay off the lowest bills first or the highest interest first, either way I'll be saving the same interest.

What's really the best way to attack this stuff?

Thanks

[wincrasher]

always listen to your iphone and do what it says.....unless it's telling you to kill, then I'd just get a less evil phone to use.

if you have trouble staying on track, then paying off the lower balance is better for you psycologically.

if you are already having cash flow issues, then pay off the one with the higher minimum first.

if you are only interested in saving money, then pay off the one with the higher interest rate first.

any regular phone would tell you this. doesn't need to be a cell phone. your home phone probably won't tell you to kill either.

[TigerFan06]

Originally Posted by wincrasher

always listen to your iphone and do what it says.....unless it's telling you to kill, then I'd just get a less evil phone to use.

any regular phone would tell you this. doesn't need to be a cell phone. your home phone probably won't tell you to kill either.

That caused an uncontrollable laughing fit. Much needed. Thanks, Wincrasher.

[elessar78]

There's no one BEST way. Waiting and inaction are your worst enemy right now. Pick a direction and go with it.

I personally have gone lowest to highest. Like you I agonized over where to start and once I got started and knocked out a couple debts, I realized I could jump around and prioritize paying off other debts first.

Like Dave Ramsey says, it's not about math—it's about behavior.

[Kris10Leigh]

I paid off the card with the lowest amount first and snowballed that payment on down. I also rolled all my debt into a 0% interest card. Once the introductory offer of 0% expired, I transferred it to a new 0% card. I think I did that three times.

Unfortunately, I think those days might be over. I haven't seen too many 0% offers lately.

[skydivingchic]

Wincrasher did a good job lining out some things to consider in deciding which debt to attack first. But as others have said, the most important thing is to start attacking one. Your debt is relatively small at ~$2000, so no matter which one you attack first the difference in the amount of interest paid in total is not going to be huge. The best method to use is the one that will work for you. If you want the high minimum card out of the way first, then start with that one.

[creditcardfree]

I agree with the others...pick one and roll with it, then attack the others! Good luck.

[EconoMutt]

Originally Posted by elessar78

There's no one BEST way. Waiting and inaction are your worst enemy right now. Pick a direction and go with it.

I personally have gone lowest to highest. Like you I agonized over where to start and once I got started and knocked out a couple debts, I realized I could jump around and prioritize paying off other debts first.

Like Dave Ramsey says, it's not about math—it's about behavior.

I agree with this 100%
You know what motivates you, so go with that.
In my case I consolidated my debt because I would rather face one big bill instead of chasing around a bunch of smaller bills.

[elessar78]

Originally Posted by wincrasher

always listen to your iphone and do what it says.....unless it's telling you to kill, then I'd just get a less evil phone to use.

Read the above yesterday, and saw this article today:

Cellphone Reminders Boost Savings Balances - WSJ.com


WASHINGTON—Cellphone text messages: bad 4 grammar, good for savings?

A new study by a group of economists looking at why people save money found that simply sending out cellphone reminders increased savings balances by 6%.

The study challenges the idea that people don't have enough self-control to save. Instead, the problem may be that they just aren't paying attention, said Dartmouth University economics professor Jonathan Zinman, one of the study's four authors.

[Nodebt13]

Snow ball is good,

so help it use new credit cards, charge them only with basic expenses.
cell, cable, gas.

And the money you are not using to pay this expenses put it in the store cards usually they are higher interest rate.

keep doing it over and over,
is 80% behavior and 20 % knowledge

[BudgetHowTo]

Try applying for a credit card with 0% interest on balance transfers for a period of time. Typically the period of time is 8-12 months. Move over as much of the money as you can pay off for the duration.

BE CAREFUL!

If you leave any amount of money from the balance transfer, you will incur back interest from the time it was deferred.

My wife and I put $3,800 on a Bank of America credit card as 0% no interest for 11 months. Had we not transferred it, we would have been paying 20% interest. We were fortunate enough to pay it off in 9 months and have kept a zero balance ever since.

Just remember that if you use this method of reducing debt that paying off the balance before the promotional period is up is key. For future credit card purchases, look for cash back incentives.

[fe2o3ez]

[quote=BudgetHowTo;242985]Try applying for a credit card with 0% interest on balance transfers for a period of time. Typically the period of time is 8-12 months. Move over as much of the money as you can pay off for the duration.

BE CAREFUL!

[quote]

Balance Transfers to 0% cards are great for reducing and consolidating debt. However, watch the 3-5% fees that the card companies will tack on to the transfer. Don't be afraid to call the company and negotiate away the fees. Tell them that you will transfer $XXXX to their card if they agree to waive the fees.

If they will not waive the fees, I don't see the advantage of switching to that card. Do the math carefully, and consider how long you will be paying off the balance. The shorter amount of time you will use the card, the more expensive the fees are, in relation to the interest that would have been incurred on the original card.

From then on, I prefer the snowball method. Smallest to Highest, to achieve quick gains and that feeling of accomplishment.

[TurnDebtIntoDebt]

It seems like you have only two accounts to pay off. At this point, either one is beneficial. Pick one and attack it while paying minimum on the other. Then once that is paid off, attack the other, applying the payment you made to the other to the second one. Actually, you can combine both Dave Ramsey's Snowball Debt plan and Suze Orman's advice. You can start with either the higher interest rate account or the lower balance account.

[connor_zen]

There is a lot of good information to be had if you search "how to pay off credit cards" in Google.

[daviddane]

Don't try to solve both of them together as it will be a great deal of chores for you and might be that neither of the two get solved easily. If i was in your place i would have taken one of the both and had ran on it like anything.

[bbtl2009]

Yes, I think you should attack the high interest card first.