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Pay Off Low-Balance Debt First For A Big Mental Boost.

There are many different schools of thought on the proper way to pay off your debt. Some say to start attacking the high-balance cards first, some say to go after the high-interest debt first, and some fall into my school of thought: start with the low-balance debt first. This is exactly how I started paying off my debt when I finally reached the point of “No More!”. I grabbed all my credit card statements, wrote down all the balances, and sent the most money that I could afford to the one with the lowest balance. Every other card on the list got the bare minimum payment until that first one was completely paid off (and even that one took a little while), and then I moved on to the one with the next lowest balance. Sure, this might have made the repayment of my debt take a little bit longer, and it might have cost me a little more in interest charges, but I did it this way for a few reasons:

  • Motivation. Seeing a balance continue to drop month after month, instead of watching it stay stagnant because of interest charges, was very motivating.
  • Hope. When that first credit card was debt-free, it gave me hope that I actually could do this. Trying to do them all at once was overwhelming.
  • Focus. By sticking to the minimums on all the other cards and having only one card to send big payments to, I could budget my debt repayment more effectively.

Credit Cards
Creative Commons License photo credit: Andres Rueda

I could not BELIEVE it when that first low-balance credit card statement showed up with ZERO balance on it. What progress! And as anyone who talks debt reduction will tell you to do, I then took what I was sending to the first card and added it to the minimum payment on the next lowest balance, continuing until all the debt was gone. It took a very long time to get there, but by focusing on the low-balance credit card debt first, the success gave me a big mental boost to keep going. A while back I wrote my series “The Start Digging Out Of Credit Card Debt Challenge” that should give you some help in getting out of credit card debt, so you might want to check that out if you are looking for more advice. Good luck, and stick with it – getting out of debt it hard, but it is so worth it!

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Comments (6)

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  1. Miranda says:

    This is the approach I took. I know I probably paid a little more in interest than I needed to, but the fact that I was making visible progress was a real motivator, and a way to keep me from being discouraged.

  2. ctreit says:

    You are probably right. It probably cost you more money in financing fees and interest charges, but if this strategy helped you get out of debt, why not use it? Your post shows that personal finance is not just about “finance” but also about “personal”. – I would not chose that route, but I have different personal attributes. Therefore, neither your strategy nor mine would be wrong. It is just a matter of applying the right strategy that fits our personality.

  3. david says:

    Absolutely – its not all about the money :)

  4. David says:

    I agree with and admire this approach. However, I did take a more pragmatic approach, I guess you could say.

    I did send more to my lower balance debts, however, I probably paid them off a little more slowly than if I concentrated strictly on paying off that balance.

    I guess I took more of a “put your nose to the grindstone” approach. I tried to not even look at those balances until I made some serious headway.

    For those in need of the motivation, this is probably a good idea. If not, focus on all of them, and especially the ones with the higher interest rates.

  5. Craig says:

    Reaching any goal is a motivational boost and by getting rid of small debt can help push towards getting rid of larger debt. Good advice.

  6. Rick Vaughn says:

    Great post!

    I’m glad to see that you had a plan and stuck to it. Not many people out there like that. Once you get that first one knocked it you never have to worry about it again. It’s like paying off your 1st bookie that you owe money too.

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