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Two Ways to Tackle Debt

Savvy Solution: Two Ways to Tackle Debt


Like most things related to money, formulating a plan is the surest way to stick to your goals. Some debt slayers simply throw most of their money (after living expenses) at their debt to pay it off as quickly as possible, and hit the ground running without a clear path. Other debt-ridden dames focused on making a change need more focus to get motivated.

When multiple credit cards are involved, the question arises of where to begin. One school of personal finance thought recommends that the card with the smallest balance, regardless of the card's interest rate, be paid off first. The strategy assumes that once the first card's debt is paid down it creates a sense of momentum that charges you to move on to the next card, and so on. Discover a different method for tackling debt when you read more.

Many personal finance gurus back the strategy of paying off the card with the highest interest rate, no matter the balance, so that overall you'll end up throwing less money away on interest. While most money is dedicated to that card, minimum payments should be made on the other cards to avoid missing payments. Once the highest interest debt is paid off, move on to the card with the next highest rate.

So which way is better? It makes more sense financially to pay off the card with the highest interest rate first, but if paying off the card with the lowest balance is what it takes for you to get motivated than so be it. Choose a plan that works for you and stick with it!

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