I saved 75% more in interest payments by paying down credit card debt the “right way.” It doesn’t require a fancy financial planner or a debt consolidation service. All you need is a few minutes of your time.
How To Do It
Write down all your credit card debts and record:
1) How much you owe on each card.
2) Interest rate on each card.
Many people make the mistake of paying down their largest debt with the largest interest payment first, without looking at interest rates. Interest rates tell you how expensive your debt is; The higher the interest rate, the more you are paying for borrowing that money.
Paying down the highest interest rate cards first will save you the most money!
Real Life Example of Saving More
I didn’t fully understand the significance of this small tip until I tested it. I was looking to pay down $500 on one of my credit cards:
I was tempted to pay down the “Credit Card C” first. Why? Because it is the largest debt with the largest interest payment. However, “Credit Card A” has the highest interest rate. I did the math for both scenarios and these were the results:
One scenario saved me $60 in interest, the other $105. That’s 75% more savings just based on which debt I decided to pay down first!
As you can see, paying down the card with the highest interest rate will save you the most money—always!
Easy to understand. Easy to do. Win!