Which Credit Card Should I Pay Off First?

Tackling credit card debt can seem like an uphill climb. And the challenge only becomes more daunting when your debts are spread across several cards — each with varying interest rates, minimum payment amounts and balances.

If you find yourself juggling debt on a few cards, you might feel at a loss about where to even begin or which credit card to pay off first. Don’t worry, you’re not alone.

A recent Tally survey of 2,026 U.S. adults ages 18 and older, conducted online by The Harris Poll, found that more than half of Americans are currently carrying credit card debt (56%). Of which, 54% say they accumulated new credit card debt during the COVID-19 pandemic. What’s more, credit card debt is the most common type of financial debt that Americans carry: Gen Zers (47%), Millennials (57%), Gen X ages 41 to 56 (61%) and Baby Boomers ages 57 to 75 (58%).   

Whether you have more or less, with perseverance and a careful, purposeful strategy, you can free yourself from credit debt.

Here’s how to get started.

What credit card should I pay off first?

Overcoming debt requires intentionality. You have to plan a course of action and then stick to it. Generally speaking, most people will select one of two methods to help them lower their debt levels:

1. The Avalanche Method

2. The Snowball Method

The first approach focuses on paying off debts by order of interest rates, starting with the highest rate. The second prioritizes card balance, starting with the lowest balance.

The Avalanche Method

The longer credit card interest builds on a balance, the more you’ll end up paying. And compounding interest — the interest earned on interest — only further adds to the credit card bill (and the stress). This is why many people prioritize paying off credit cards with the highest interest rates first.

The avalanche method employs a debt elimination strategy known as debt stacking, in which you focus on the card with the highest APR first to save money on credit card interest over time.

How it works is simple:

1. List all of your credit card debts totals and corresponding interest rates.

2. Order debts from highest to lowest APR.

3. Continue to make the minimum payment on each credit card.

4. Put as much money as you can spare into payments on the card with the highest APR.

5. After paying off the card, repeat steps 3 and 4 with the next highest APR card.

6. Continue until all debts are settled.

This method focuses on cost savings momentum over time.

Once momentum builds—like an avalanche—there’s no stopping it.

How to employ the Avalanche Method

Here’s what a credit card debt avalanche method could look like with four credit cards:

• Mastercard – $10,000 at 12% APR, with a 2% minimum

• Visa card – $3,000 at 18% APR, with a 2% minimum

• Travel card – $5,000 at 20% APR, with a 2% minimum

• Apple Card – $2,000 at 15% APR, with a 2% minimum

By simply making the minimum payments on each card, it would take you more than thirty years to get out of debt (as seen by this credit card minimum payment calculator). But a debt avalanche could help eliminate a significant percentage of this interest over time.

You’d start with the travel card, which has the highest interest rate. Once that’s paid off, you’d then move to the Visa, then the Apple Card, and finally, the Master card, which has the largest balance but the lowest APR.

When the highest APR happens to be on the credit card with the highest balance, this method can make progress feel slow. In the example above, if the Mastercard and travel card APRs were swapped, you would have to pay off the largest debt balance over many months without seeing progress on any of your other accounts.

This psychological aspect—watching the number of credit cards you have go down—is what the snowball method capitalizes on.

The Snowball Method

The point of a debt payment method is to pay off all your credit card debts. But this can take years depending on how much debt you have accrued. The debt snowball method offers the motivation needed to keep paying off debt, month over month.

This method prioritizes credit cards with the lowest balance. By paying off this credit card first, you gain a small win, encouraging you to tackle the next lowest balance.

In simple terms, here’s how it works:

1. List all of your credit card balances and minimum payments

2. Order debts from lowest to highest balance

3. Continue to make the minimum payment on each credit card

4. Put as much money as you can spare into payments on the card with the lowest balance

5. After that card has been paid off, repeat steps 3 and 4 with the next lowest balance

6. Continue until all debts are settled

By paying off the smallest credit card balance first, you create a snowball effect where you have fewer cards to think about, and fewer debt payments.

Using the example of the four credit cards mentioned above, the snowball method would have you pay off the $2,000 on the Apple Card. Once finished, you’d then tackle the Visa card, the travel card, then finally, the $10,000 Mastercard.

While the debt snowball method doesn’t offer as many cost-saving benefits, it does align with the most important aspect of debt repayment—having the motivation to pay off all debts.

Other credit card debt strategies

Aside from the avalanche and snowball methods, there are also several other strategies to consider for credit card debt relief, including:

• Focus on your credit score factors – If you want to improve your credit score as you pay down your debt, this method helps you do that. Unlike the avalanche and snowball methods, you instead focus on the credit cards that are nearing your credit limit. One major factor that goes into your credit score is your utilization rate. This is based on how much of your card’s credit line is being used at a given time. So the goal of this payoff method is to lower your balance on all of your credit cards to under 30% of your credit limit.

• Debt consolidation – If one of your cards has high-interest rates, it may be possible to transfer its balance to a card with lower rates so that you spend less money on interest over time. Debt consolidation also pairs nicely with the avalanche method since you can strategically reduce the interest rate on your highest-interest rate debts.

• Personal loan – If your credit card debt is overwhelming, one option may be to pay your obligations using a low-rate personal loan. This debt consolidation can help with your credit score, especially regarding your credit utilization and balance-to-limit ratio. Plus, if the personal loan can pay off multiple credit cards, this will reduce the number of minimum payments you have to remember.   

• Debt settlement – If you’re past-due on your credit card payments and can make a significant, one-time settlement payment, you could enlist the services of a debt settlement team. They could set up a debt settlement, in which the credit card company allows partial payments to satisfy previous credit card debts. 

• Bankruptcy – This is a last-ditch option for when you’ve run out of choices. Bankruptcy lets you press reset on your financial obligations; however, it can ruin your credit. If you file personal bankruptcy, you’d either have to file Chapter 7, which requires you to surrender some (if not all) of your property, or Chapter 13, which allows you to retain your property. Remember: This should only be done when absolutely necessary. And, before taking this step, consult with a bankruptcy lawyer to ensure it's the right step for you.

Helping you live a debt-free life

After you’ve begun the journey toward being debt-free, what comes next?

For starters, one of the most important things you can do is analyze your spending habits. Often, debt arises little by little, until the balance is so large that it has to be addressed. This type of debt might be unavoidable depending on your spending habits.

Try to separate your monthly payments between necessary payments (like rent, groceries, insurance, car payments, etc.) and luxury payments (like shopping for clothes, traveling, vacation, etc.). Then, split up your household income to see how much you can afford after your necessary payments have been settled.

Related: How To Become Debt-Free … and What It’s Like

Be sure to put some of that money aside in a savings account to prepare for any emergency.

By taking the time to understand where your money is going, setting up a budget, and looking for cost-saving opportunities (like buying certain groceries in bulk), you can be on your way to a debt-free life.

Why focus on debt payments?

There are many ways to help chip away at debt, whether it’s cutting out cable or streaming subscriptions, avoiding eating out, or picking up a side gig. But you might still be wondering, why bother?

There are many tangible benefits that people experience when they rid themselves of debt, including:

• Stress relief – When the cloud of debt is no longer hanging over your head, you can sleep easy knowing you don’t have to worry about how to manage debt payments each month. 

• Increased financial security – Creating financial freedom gives you the confidence to plan for your future needs. While this doesn’t mean you won’t ever have to worry about money again, it can provide you with a safety net and increase your financial security.

• Increased savings – After you’ve gotten out of debt, you can start to focus on your savings. Even the interest saved on paying off debts can go toward an emergency fund, a much-deserved trip, or be saved for the future.

Pay off your credit cards smarter with Tally

Chipping away at debt isn’t an easy task. But it is a manageable one—especially if you pair one of the two methods above with the right tools.

Enter Tally† — the world’s first automated debt manager. We offer you a better way to pay off your cards while saving money on interest. Tally consolidates all of your credit card debt into a single monthly payment at a lower interest rate. Then, our Tally Advisor looks at your budget and recommends how much you should pay each month to save the most money on interest and get out of debt faster. 

To achieve the financial freedom you’ve been searching for, check out Tally today. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.