No one intends to go into significant debt. However, given the rapidly rising cost of living, millions of people are finding it difficult or impossible to chip away at their credit card debt. If you’re taking the first step toward better financial footing, you need the answer to one question — which credit card should I pay off first? Here’s a look at some strategies to consider.
There’s no single strategy for paying off credit cards. However, one of the most popular methods involves paying the smallest balance first, while another involves starting with the highest-interest debt.
Credit Card Debt: A Growing Problem
If you’re struggling with credit card debt, you’re certainly not alone. Credit card debt in America is higher than ever — and it’s growing at an unbelievable rate. In the fourth quarter of 2024, credit card debt hit a record high of $1.21 trillion. This is an increase of $45 billion from the third quarter of 2024.
Unfortunately, the very high interest rates that most credit card companies charge make it extremely hard to get out of this type of debt. However, by breaking down your debt, choosing a repayment method, and sticking to a plan, you might find that achieving financial freedom is more feasible than you thought.
Which Credit Card Should You Pay Off First?
The Answer Depends on Who You Ask
Before you start paying off your credit cards, you need a plan. The first step is to decide which credit card you should pay off first. There are two popular repayment strategies:
- Snowball Method: Start by paying down the card with the lowest balance.
- Avalanche Method: Start by paying down the card with the highest interest rate.
Here’s a closer look at how each method works — and how to decide which is right for you.
The Snowball Method
With the snowball method, you make minimum payments on all of your accounts, but you put any extra money you have toward the card with the smallest balance. The more money you can set aside every month to put toward this bill, the faster the snowball method will pay off.
Once you take the balance on this smallest debt to zero, you can apply what you were paying every month to the card with the second smallest balance. That’s where the name of this method comes from: Like a snowball rolling down a hill, the amount you put toward each debt grows, and with it, you gain motivation and momentum.
Here’s a simple example of the snowball method in action. Suppose you have three credit cards:
- Card 1: $1,000 balance and $25 minimum monthly payment
- Card 2: $4,000 balance and $50 minimum monthly payment
- Card 3: $8,000 balance and $150 minimum monthly payment
After paying the minimums on each card, you have $200 extra in your budget every month. You put this $200 toward Card 1, paying it off within five months. Then, you take that $200 (plus the $25 monthly minimum you were paying for Card 1) and apply it to Card 2 until it is paid off in full.
Being in debt can be discouraging. When you hit a milestone like paying off a card in full, you could get a big boost of motivation. However, the snowball method is not without downsides. Because it focuses on the balances of your cards and not the interest rates, you may pay more over time than if you were to tackle the card with the highest interest rate first.
Are you struggling to resolve credit card debt? We might be able to help. Call Fesenmyer Law Offices, LLC at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) to set up your free consultation today.
The Avalanche Method
The avalanche method is a repayment strategy that prioritizes tackling high-interest debt first. With this method, you continue making all minimum payments. But instead of putting all of your extra funds toward the card with the smallest balance, you put them toward the card with the highest interest rate.
With this method, you’ll pay less overall. From a purely mathematical standpoint, it’s a better option than the snowball method. However, suppose your credit card with the highest interest rate also has the highest balance. With the avalanche method, it could take a long time to pay off just this one debt — and that makes it harder to stay motivated.
While the avalanche method does involve paying less over time, the difference may be minimal, especially if your credit cards have similar interest rates. No matter which strategy you choose, you’re still paying down debt, and that’s what’s important.
What if You’re Still Struggling to Pay Credit Card Debt?
Some people can ultimately get out of credit card debt with the avalanche or snowball method. But what if you have more debt than you can reasonably pay off? It may be worth considering filing for bankruptcy. Depending on your financial situation, you might find that Chapter 7 or Chapter 13 bankruptcy is better.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy may be right for you if you have limited or inconsistent income, few assets, and more debt than you think you can repay. In a Chapter 7 there are exemptions that will protect some or even all of your property from being sold. Most of your debts — including credit card debt — will be discharged.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often called a “wage earner’s plan.” This means that it may be a better option if you have a consistent source of income. With Chapter 13 bankruptcy, most of your debts are restructured rather than discharged. You pay toward your debts according to a court-approved repayment plan for three to five years. In most cases, any credit card debt that remains after the completion of the payment plan will be discharged.
Need Help Dealing with Debt?
Call Fesenmyer Law Offices, LLC Today
Because many people struggling with debt don’t know where to turn, their debt keeps spiraling out of control. Instead, you can take action by reaching out to the experienced debt relief attorney at Fesenmyer Law Offices, LLC. We can discuss your situation and help you craft a personalized strategy for resolving your debt.
Struggling to resolve credit card debt on your own? Call Fesenmyer Law Offices, LLC at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) to schedule your free consultation today.
