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There's another advantage to paying off the lower balance first: it improves your cash flow more quickly. Once that lower amount is paid off, you now have an extra $XXX dollars/month to play with. You can (and probably should) put that money toward paying off the larger debt faster - but you can also use it to build up an emergency fund, or to pay for something unexpected but urgent (such as car repairs). Fewer mandatory minimum payments each month means more financial flexibility.
The disadvantage, of course, is that you pay for that flexibility in the form of more total interest paid, but sometimes that tradeoff may be worth it.
How is paying toward the larger card a loss of flexibility, when we are talking about a revolving account that can be re-borrowed as soon as it is paid down? If we were talking about installment debt, I would agree with you, but for revolving debt, there is no real loss of liquidity.
How is paying toward the larger card a loss of flexibility, when we are talking about a revolving account that can be re-borrowed as soon as it is paid down?
Two credit cards carrying a balance means two minimum monthly payments. Money that's committed to making minimum payments is money that can't be spent elsewhere.
Once the person pays one of the cards off, now there's only one minimum monthly payment to make. The money that used to be used to make the other card's minimum payment can now be used anywhere it's needed most.
One of the biggest problems people carrying a lot of debt often have is that the debt is spread out over many, many sources, thus committing them to many, many minimum payments that tie up too much of their income. Either getting some of those smaller loans paid off ASAP or consolidating all the debt into one loan solves that problem.
Two credit cards carrying a balance means two minimum monthly payments. Money that's committed to making minimum payments is money that can't be spent elsewhere.
Once the person pays one of the cards off, now there's only one minimum monthly payment to make. The money that used to be used to make the other card's minimum payment can now be used anywhere it's needed most.
One of the biggest problems people carrying a lot of debt often have is that the debt is spread out over many, many sources, thus committing them to many, many minimum payments that tie up too much of their income. Either getting some of those smaller loans paid off ASAP or consolidating all the debt into one loan solves that problem.
What you're missing is the fact that the minimum payment goes up as the balance goes up. Yes, a paid off card will only have one minimum payment, but the minimum payment is tied to the balance, so it will be twice as high. You typically don't gain anything by shuffling balances like that.
The typical formula for calculating minimum payment is something like 2% of the outstanding balance with a minimum payment of $25 (exact numbers may vary by CC company).
If you're talking about a debt of $5,000 on one card and a debt of $10,000, regardless of which card you pay, you're reducing your debt by the same amount(let's say $1000) which means a 2% reduction in minimum payments($20/month) regardless of which card.
Paying down the higher interest card gives you greater flexibility because it helps you get out of debt quicker. If the higher debt is 20% and the lower debt is 10%, that means each $1000 you pay saves you $16/month vs $8/month in interest.
Paying less in interest means you can pay more towards principal.
Paying more towards principal means you have a lower balance.
Lower balance means lower minimum payments.
And finally, lower minimum payments means more flexibility.
*Note: The exception to this is once the debt is less than $1,250 because at that point, the guaranteed minimum payment of $25 kicks in. Once you're below that threshold, you gain more flexibility by eliminating the debt entirely.
Looks like I'm not qualified so I won't have to worry about transferring. It was said the decision v would come in the mail
Chases approvals are not always instant, unless it was stated otherwise, but you say the decision will come in the mail, not the reason for denial, so there's still hope.
Chases approvals are not always instant, unless it was stated otherwise, but you say the decision will come in the mail, not the reason for denial, so there's still hope.
I had a option to get a answer in 15 seconds online and that's when it said it will be in the mail
Two credit cards carrying a balance means two minimum monthly payments. Money that's committed to making minimum payments is money that can't be spent elsewhere.
Once the person pays one of the cards off, now there's only one minimum monthly payment to make. The money that used to be used to make the other card's minimum payment can now be used anywhere it's needed most.
One of the biggest problems people carrying a lot of debt often have is that the debt is spread out over many, many sources, thus committing them to many, many minimum payments that tie up too much of their income. Either getting some of those smaller loans paid off ASAP or consolidating all the debt into one loan solves that problem.
Even if you have to make a minimum payment, you can immediately use the card to pay for groceries or something else and free up the money you would have otherwise used for it. So it is re-borrowable even without cash advances.
Even if you have to make a minimum payment, you can immediately use the card to pay for groceries or something else and free up the money you would have otherwise used for it. So it is re-borrowable even without cash advances.
Also what Jeo said.
If your credit cards are for dept stores you can't use that card for groceries. Pay those off first then you'll have free cash to pay other debt or spend on other items.
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