Suggestions on Paying Off Credit Cards

Benefits of Paying Off One Card Completely:

  1. Improved Credit Utilization: Credit utilization (the percentage of your credit limit used) is calculated per card and across all cards. Paying off one card reduces the utilization on that card to 0%, which can significantly boost your credit score.

  2. Streamlined Debt Management: Managing one card instead of two simplifies your payments and reduces the risk of missed payments. You can focus all your efforts on the remaining balance.

  3. Psychological Wins: Fully eliminating one debt is a motivating milestone. This “snowball” effect can help maintain momentum to tackle the remaining debt.

  4. Interest Savings: Both cards have the same 20.99% interest rate. Paying off one completely will ensure you avoid paying any further interest on that balance, maximizing the impact of your $7,000.

Why Not Split the Payment?

  1. No Interest Rate Advantage: Since both cards have the same interest rate, splitting the payment doesn’t save you any additional money.

  2. No Immediate Progress: Splitting the payment would reduce balances on both cards but leave interest accruing on both, which diminishes the impact of your payment over time.

What’s Next?

After paying off the $7,000 card:

  1. Focus on the $9,600 Card: Direct all extra cash toward this card while continuing to make minimum payments.

  2. Consider a Balance Transfer: If you qualify for a 0% APR balance transfer card, you could transfer some or all of the $9,600 balance. This will buy you time to pay it down without accruing interest.

  3. Build an Emergency Fund: Avoid relying on credit cards in the future by setting aside some savings for unexpected expenses.