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  Dear
Steve,
I understand that one should pay off the credit card with the highest
interest first, but I have a card at 12 percent with $1,500 of debt
and a card at 18 percent with $6,000 in debt. Since the two cards
have such different amounts, and $1,500 is a relatively small amount
of money, would it look better if I paid off the smaller card first?
-- Sharon
 Dear
Sharon,
I recently started going to my local gym to shed a few pounds that
I picked up on the good cruise ship Mercury. The trainer I am working
with crafted a program that will not only lose the inches, but that
fits me personally so that I am more likely to actually complete the
program. Your situation is similar, as you are concerned not only
about how your financial figure looks to others, but getting it in
shape your way. My experience tells me that whether it be debt or
doughnuts, a reduction program has to make sense to you.
Most experts would advise you to pay off the highest
interest rate card first so you can avoid paying a huge amount of
money in interest charges. This can occur if you are only making
the minimum payment on a high interest rate card for an extended
period of time while putting your free cash flow toward paying off
another card.
Keep in mind that the ultimate goal of most people
in credit card debt is to get rid of it and not find themselves
in the same situation again. Motivation is the key. Some people
choose to tackle a small balance first. Seeing a credit card statement
with $0.00 in the finance charge box can be just the right motivation
to keep going and pay off the others. If that means they will pay
slightly more in interest charges on other cards, but by paying
off one balance they will commit to paying off all their balances,
then I'm all for it. So, if you find that you are having trouble
committing to paying off your debt and it would help to see the
$1,500 balance gone, by all means go ahead and pay it off first
and then tackle the $6,000 balance. The important thing is to follow
through with both.
As far as your question regarding how it will look,
I'm assuming you are asking how it will look on your credit report
and specifically how it will affect your credit score. The most
important thing to remember when paying off credit card debt as
it pertains to your credit report is to avoid closing long-standing
accounts once they are paid off. Two negatives can occur if you
do. One, the account may be the oldest established account on your
report, and if closed will cause your score to decrease because
your length of credit history will be shortened. Two, by closing
the account you lose access to an available credit line and that
will push up your ratio of debt to available credit. Which one you
pay off first shouldn't make a big difference.
Whatever strategy you use to pay down/off your credit
card debt, remember to always pay on time and don't add any additional
charges to the accounts until you get to your goal, if you can avoid
it. As for me, the question is whether to have the brownie
that came with my lunch!
Good luck!
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