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How Do I Know Which Credit Card to Pay Off First?

Last Updated: January 23, 2023
4 min read

Key points about: how to pay off multiple credit cards

  1. Assess your debt-to-credit ratio and determine how much you can use each month to pay down debt.

  2. Keep paying your monthly minimum payment on every card, otherwise you could incur fees that could cost you more.

  3. Methods to pay off credit card debt include the “avalanche method,” the “snowball method,” or you can apply for a balance transfer credit card.

You’re ready to pay down your credit card debt, but you carry a balance on multiple cards. What should you do: Pay off one card? Which one? Pay down them all equally? Stagger the payment amounts? Consider these tips to help you decide which credit card to pay off first and whether it’s best to pay off one credit card at a time, or work towards paying down multiple cards at the same time.

Understanding your debt-to-credit ratio

One of the first steps you should take is assess your overall credit card debt. Your debt-to-credit ratio (also known as your credit utilization ratio, or debt utilization ratio) equals your debt divided by your total credit, which might be the sum of several lines of credit.

Did you know?

Your debt-to-credit ratio is an important factor in determining your credit score. It’s best to keep your debt-to-credit ratio low; you should aim to have the sum of your balances under 30 percent of available credit.

Budget how much you can use to pay off credit cards

Add up all of your monthly expenses, including your bills and necessities like groceries, and subtract that from your total monthly income. This can help you calculate how much you can budget to pay off credit card debt.

Keep making your minimum monthly payments

No matter which process you use to pay down your credit card debt, you will want to keep paying your minimum monthly credit card payment on every card. Don’t stop paying one card to use those funds to pay down another card. While that may help you pay off one card faster, you’ll incur late fees and other penalties on the account you stopped paying, which could end up costing you more money in the long run.

How to pay off multiple credit cards

The best way to pay off multiple credit cards will likely depend on several factors, including your current debt levels and the Annual Percentage Rate (APR) on each credit card. Here are some methods for paying down credit card debt.

Pay off high-interest credit cards first

Paying off the debt on the card with the highest interest rate first is one method to reduce credit card debt. This is called the “debt avalanche method.” While some advocate for paying off your smallest debt first because it seems easier, you may save more on interest over time by chipping away at high-interest debt.

Once you pay off the credit card with the highest APR, then you take that payment amount and add it to the minimum payment for the credit card with the second-highest APR, which can help you pay it down faster. Continue this method as you pay off each credit card account.

One caveat: If you are close to the maximum credit limit on one card, start by paying down that card so that the interest charges don’t send you over your credit limit, which could result in fees.

Pay off the credit card with the smallest balance first

Another method to pay off multiple credit cards focuses first on the credit card with the smallest balance. This is called the “debt snowball method.” Think of it this way: A snowball starts small at the top of a hill, but as it rolls it gathers more snow and grows bigger and bigger. Apply this analogy to your credit card debt.

When you pay off the smallest balance first, you can then take that monthly payment and add it to your next smallest credit card balance. As you pay off each balance, the amount you can pay on the next credit card grows larger and larger.

Balance transfer to a 0% APR credit card

Many credit cards have 0 percent introductory APR offers. Transferring your balances to cards with a 0 percent intro APR can give you the chance to save on interest while paying off your debt. But read the fine print: some credit cards charge a balance transfer fee, usually a percentage of the amount being transferred. Also, learn how long the introductory offer on the balance transfer card is good for—once it expires, your interest rate will increase, and you could be charged accrued interest if the balance hasn’t been paid in full before the introductory rate expires.

Should you close a credit card account when you pay it off?

As you pay off your credit card debt, you may wonder if you should close the account as well. There is no right or wrong answer, as this will depend on your credit history, but closing an account could impact your credit score.

If you close the account, you’ll lose access to that amount of credit, which can raise your credit utilization ratio and could hurt your credit score. If the credit card account you want to close has been in use for a long time, that too could hurt your credit score because it will impact your length of credit history.

But a credit card with no balance could also be subject to other fees, or the card may have an annual fee even if you’re not using it. So be sure to know the card’s terms if you decide to keep it open.

The best way to pay off multiple credit cards largely depends on your current financial situation. Deciding which credit card to pay off first may depend on the interest rates on your cards, or how big a balance each card has. Having this knowledge, you can begin the steps to pay off debt on multiple credit cards.


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