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When Paying Off Credit Cards, It’s Tough to Beat the “Lowest Balance” Approach

These days, it’s hardly out of the ordinary for people to carry significant credit card balances. It’s not necessarily due to self-indulgent, carefree living or anything like that, but, rather, because of just how difficult it is to get by these days, in a world still characterized by economic malaise, to include rampant underemployment, which, in many respects, is worse than the outright unemployment problem plaguing the nation. One such person recently asked for my thoughts on just how to get out from under his burdensome credit card debt. His situation is not unusual: he’s a fellow with three cards, and a total balance of around $20,000. He asked me what I thought of the “highest balance” approach to paying down this obligation, as this is something he heard a financial planner recommend recently on the radio; what he’s referring to is the targeting of multiple credit card debt on the basis of focusing on the card with the highest rate, making minimum (or thereabouts) payments on the other two while applying any extra resources to the card sporting the highest rate.


To be honest, that’s not my favorite system. I prefer the “lowest balance” approach, which is what I told this gentleman. By focusing on the card with the lowest balance, without regard to the rate of that card, this tactic allows the consumer to more quickly eliminate the entire debt of one of the cards he’s currently holding. The overriding benefit of this approach is that it affords the consumer the opportunity to enjoy that inspiring feeling of accomplishment more quickly, which is so important to maintaining an ongoing, oft-times burdensome effort at achieving a significant financial objective. In my experience of having witnessed countless numbers of people engaged in debt reduction efforts, the psychological boost earned from eliminating an entire credit card balance outright trumps the intellectual satisfaction of knowing that the card with the highest rate is being targeted.

In the end, any kind of long-term effort at achieving a financial goal requires psychological self-support, and so each person has to ask himself, at the outset of whatever the undertaking is, which way of achieving the goal will, inherently, provide the most support along the way. In the case of paying down multiple debts, the sense of achievement that comes with ridding oneself of one of those obligations completely is unrivaled, which is why I like best the method that allows you to realize that goal in the fastest way possible…and why I believe you will, as well.  

Robert G. Yetman, Jr.
Managing Editor, The James L. Paris Report