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Paying Down Credit Card Debt - CS

Sharon Naylor - Creators Syndicate

 

 

PAYING DOWN CREDIT CARDS

Which card should you tackle first?

Sharon Naylor

Distributed by Auspac Media – word count 800

You may have read online or heard a financial expert report on television that the best method of paying down the entirety of your credit card debt is to direct your pay-down funds to the credit card with the highest interest rate. While there is merit to that advice, you might choose to pay down your credit cards in a different order, such as paying down -- or paying off -- the cards with the lowest balances instead.

     Financial experts say that as long as your total credit card debt is decreasing, there are benefits to different personally-selected card prioritising plans. For instance, if you have four credit cards with various balances on them and you choose to pay off the card with the lowest balance, you might enjoy the rewarding feeling of accomplishing one paid-off card. Achieving one zero balance right away can create more confidence that you (SET ITAL) can (END ITAL) pay down your cards, starting this process off with a more satisfying result than devoting a payment to a high-balance card and seeing very little headway month-to-month.

     According to the financial website Mint.com, there is also another benefit to accomplishing one or two zero-balance cards. Each of your credit card issuers can check your credit reports at any time through their "account management" processes. If they see that all of your cards have high balances, they could use that information to potentially raise the interest rate on the card you have with them, lower your credit limit or even close your account. Also, your all-important FICO score can improve if you have one or more zero-balance credit cards. Your FICO score is configured using intricate formulas; one of the components of that score does take into account how many lines of credit you have with more than a zero balance, so it's possible that one or two paid-off, lower-balance cards could boost your FICO number.

     If you decide to pay off your highest-limit, highest-balance credit cards first, be aware that some credit card companies may decide to lower your credit limit the moment you pay off a chunk of your balance -- a practice that is commonly referred to as 'chasing the balance.' Mint.com says that your credit score can benefit from having cards with high limits.

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