Day 7 of the No Credit Needed 33 Days and 33 Ways to Save Money and Reduce Debt

The verdict is out on which way is better to paying off credit card debt. There are those who believe that we should start with the highest interest rate and pay that off first. Others believe that we should start with the smallest amount. Finally, David Bach, the Automatic Millionaire suggests a hybrid solution in a recent posting on Yahoo! Finance. His method gives points based on interest rate and size of debt to figure which credit card will get the most attention. Like weight loss, I believe that the answer lies within. Which one works for you? The idea is to pay the minimum on each debt except for the focus debt. After that one is paid off, transfer the amount paid for that debt to the next lucky winner and so on. It is better known as a "snowball effect".

I personally like to mix it up. I will start with the smallest amount owed with the largest interest rate. That way I get the psychological rewards along with the financial benefit of paying off a high interest rate. I just recently paid off a store credit card which had a 21% interest rate. I then switched my attention to a Line of Credit attached to my checking account. These are both small amounts, but they deplete resources for taking care of my two focal debts; a couple of Visa cards. Its sad to say, but I'm looking forward to working on that one. I think that the small triumphs help build the momentum so I don't loose enthusiasm for that challenge.