 TITLE: Should I Pay Off Debt With the Highest Balance or Highest APR First? CONTENT: Consider Paying Credit Cards With the Highest Interest First\n------------------------------------------------------------\nYou'll typically save the most money if you get rid of high interest debt as quickly as possible. The longer interest accrues on a balance, the more you'll pay. Compound interest makes this even more of a challenge because it means you'll pay interest charges on top of your existing accrued interest each month.\nPrioritizing debt payoff based on interest rate is called the debt avalanche method. To begin, make a list of each of your debts, including their current balances, minimum monthly payments and interest rates, and sort them in order of interest rate.\nMake the minimum payment on each debt so that you never fall behind, but put as much money as possible toward the debt with the highest rate. Once you pay it off, you'll no longer have to make that minimum monthly payment, so you'll apply that amount to the next debt on the list.\nHere's an example. Let's say you have four debts:\n*   A student loan of $4,000 at 7%\n*   A credit card balance of $3,000 at 20%\n*   A second credit card balance of $6,000 at 18%\n*   A personal loan of $5,000 at 12%\nUsing the debt avalanche method, you attack the credit card with the 20% interest rate first, even though it has the smallest balance. If your minimum payment on that card was $120 per month, you'd pay extra toward it until it's gone.\nYou'd then apply that $120 to the credit card balance with the interest rate of 18%. Once that debt is paid off, prioritize the personal loan next, applying to it the minimum payment of $240 from your second credit card. In the meantime, your student loan at 7% would continue to accrue interest until it's paid off—but not as much as your higher-rate debts would have. END