Q: Which credit cards should I pay off first?

A: It is normally wisest to pay off your credit cards with the highest interest rates first. This is because those balances compound with interest faster, and if you make only the minimum payments, a smaller percentage of your monthly check is going to paying down your balance. Whatever you pay above the minimum, however, goes directly to paying off your balance, so it is usually smartest to pay off these high-interest cards first.

There are a couple of exceptions: First, if you have a card with a high annual fee that actually makes the effective interest rate higher, then you may want to pay off and close that card first, assuming you don't want to use the card anymore. Secondly, if the size of your balance makes a lower-interest card's minimum monthly payment uncomfortably high, then you may wish to begin paying that card down first, thus reducing the minimum payment over time.

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