Anyone who wants to get out of credit card debt faces one major question. Whether to pay off the card with the least balance or the one with the highest APR?
Is it better to pay off the card with the maximum APR first or is it better to pay off the card with the least amount of money on it first?
Financially, it makes sense to pay off the card on which you are paying the highest interest rate. Because the sooner you get rid of the balance on this card the less interest you will have to pay. This is the advise that most financial advisors give which is really sound advise and makes perfect sense. However it does not take into account the psychological aspect of paying off credit card debt.
The truth is that if you are up to your neck in credit card debt, chances are, that you are not feeling too good about yourself and need as much moral boost that you can get.
This is where paying off the card with the minimum amount on it, comes into play. I have really seen this helping a lot more people than the financially savvy plan.
I think the primary reason is the wow effect it creates on your friends. I remember when, once one of my friends proudly announced that she just paid off her third credit card completely and cut it into 39 pieces! There was instant applause and everyone was hugging and cheering her.
This must have really boosted her morale and helped her feel good about herself. The fact that she came out of all her debts in about 9 months from that date shows that the method worked for her.
So keep this in mind, if you or someone you know is planning to come out of credit card debt. We are, after all, guided more by our heart than our minds.