Which of the following strategies is generally considered the most effective for eliminating high-interest credit card debt?
1. Paying the minimum amount due on all cards
2. Focusing on paying off the card with the highest interest rate first
3. Consolidating all debt onto a new credit card with a lower APR
4. Making a bigger payment to one or more cards as often as possible
Answer:
2. Focusing on paying off the card with the highest interest rate first
Paying off the card with the highest interest rate first is known as the “debt avalanche” method. By focusing extra payments there, the total amount of interest paid is reduced and can help debt be eliminated more quickly.
