If You Have Multiple Credit Card Balances, Here’s Which One You Should Pay Off First

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If your wallet is starting to feel heavy from the weight of too many credit cards, you’re not exactly alone. 

The average American has between three and four credit card accounts, with an average credit card balance of more than $5,000, according to recent data from Experian.

Of course, there’s nothing implicitly wrong with having more than one credit card. But if too many card balances are causing you to miss payments or leave you unable to pay down balances in full, the costs add up quickly. Americans are buried in more than $790 billion in credit card debt, according to Federal Reserve Bank of New York data, and few people can afford to ignore that heavy feeling they get when charging items without a plan to pay for them later — whether due to an unexpected emergency or spending without a budget.

An abundance of resources are out there to help you get out of debt, including the Consumer Finance Protection Bureau (CFPB) and qualified, fee-based financial planners. But if you’ve taken on debt with multiple credit cards, it can help to determine where you should start before you tackle your balances. Here are a few things to consider as you strategize the best way to pay off credit card debt: 

Ask Yourself Which Card Charges the Most

While credit card debt can be overwhelming — especially when you have a balance on multiple cards — there are some tried and true methods that can help you pay debt off as quickly as possible. 

As a first step, find out how much each card charges in interest, expressed as APR, or annual percentage rate, says Alicia R. Hudnett Reiss, certified financial planner and founder of Business of Your Life, a Washington, D.C-based financial planning service.

Then you can use a debt payoff calculator to determine which credit card balance is costing you the most. Write down each of your cards’ total balances, interest rates, and monthly payments; then you can use the calculator to see how much of your payment goes toward interest versus your principal balance.

For example, plugging in the below figures into this calculator:

  • Credit card with a $5,000 balance
  • 18% APR
  • $100 monthly payment
  • $75 goes towards interest, and only $25 goes towards the principal balance. 
  • The total interest paid will be $4,311.18 (in addition to the $5,000 balance)
  • It will take 7.8 years to pay off the balance

Most people don’t actually look at the interest rate on their cards, says Hudnett Reiss. Often, people charge purchases to credit cards to spread the cost out over a few months, without realizing that costs can balloon as the balance sits unpaid and accrues interest.

“You might say, ‘Okay, I just spent $100 on this beautiful shirt. But because I’m paying this off in six months, this shirt is actually $200,’” says Hudnett Reiss. To those clients, she asks: “Would you actually pay $200 for [the shirt] in the first place?’”

Should You Pay Multiple Cards or Focus on One?

Once you know how much each credit card balance costs you, it’s time to decide which one to pay off first. As long as you meet your minimum balances on every card, it can be more efficient to focus on a single debt balance at a time during your payoff period.

First, make sure you avoid any missed payments or penalties by setting up all credit cards with a monthly auto-payment that covers at least your minimum payments. This step will protect your credit score too, as on-time payments are one of the top factors credit bureaus use to calculate your creditworthiness.

Once all your monthly auto-payments are set up, decide how much extra you can afford to budget for debt payoff. For instance, if you can afford to put $200 per month towards paying down your debt and your monthly payments across all of your cards equals $50, then you have $150 to strategically knock out one balance at a time using the debt payoff strategy that works best for you.

Best Debt Payoff Strategies

The avalanche method

One option is to pay off the credit card with the highest APR first. The average credit card APR is around 16%, but some can charge up to 25% or more. No matter how large a sum you can apply toward your debt per month, you can put it all toward the card with the highest APR to minimize interest charges.

This method, called the “avalanche” method since you’re starting from the biggest number, is what Hudnett Reiss calls “the easy, simple mathematical answer.”

The snowball method

A second popular strategy — known as the “snowball method” — takes the opposite approach and progresses from smallest to largest. You can stay motivated with a quick win by bringing your smallest balance down to $0 fast. This helps you avoid further interest charges on that card, and simplifies things by eliminating one of your monthly bills. You can then apply what you were paying towards that minimum payment to the second-highest balance, and so on (like a snowball — get it?).

“Everybody can make their own decision, but absolutely my preference is to pay the lower balance off first,” says Hudnett Reiss.

Balance Transfer Options

If you have a good credit score, you might be able to save money on interest by opening a balance transfer credit card with an introductory 0% interest period anywhere from six to 18 months. A few of our favorite balance transfer cards on the market today include:

Not everybody can qualify for a balance transfer card. You’ll need a good or excellent credit score to get approved for the best options. If your score is lower than about 670, you may have difficulty qualifying for a new card. But you could try asking your current card issuer for a promotional APR period, says Shanté Nicole Harris, credit repair expert and founder of Financial Common Cents, a credit coaching service. 

“Tap into the cards you already have to see what they can offer you, Harris Says. “If I were to log into Discover right now and click ‘request balance transfer’ it is going to either tell me ‘Sorry, we don’t have any offers for you today or ‘Hey, we have one.’ They come every now and again.”

Check your email and mail for targeted offers or promos, or pick up the phone and give your card issuer a call.

What to Look Out For With Balance Transfer Cards

If you do apply for a new balance transfer card, make sure you’re confident in your approval odds so you don’t need to apply for too many cards at once. Each time the credit bureaus check your credit, it shows up on your credit report as a hard inquiry and can have a temporary negative effect on your score. Also, be aware that credit cards — particularly balance transfer cards — are not always easy to qualify for. During the pandemic, many card issuers tightened the requirements for approval on new credit.

Pro Tip

If your score is too low to qualify for a balance transfer card, try asking your current creditors for a lower APR period instead.

Once you get approved for a balance transfer card or temporary 0% APR period, move your existing debt to the no-interest account. Sometimes, the balance transfer limits are lower than your normal credit limit, so watch out for that when you budget. You may also encounter a balance transfer fee, often around 3% — though often this fee is less than what you would pay in interest by keeping the debt on the old card. It might take at least one billing cycle to complete the transfer, so don’t forget to continue paying your old account until the process is finished.

And, like all credit cards, expect to incur fees and late charges if you fail to make your payments on time. Just because a card has 0% interest for a period of several months doesn’t mean you can put it away and forget about it. Always read your card agreement and offer terms thoroughly, and don’t forget to set up a recurring payment just like on all your other cards so you can pay down as much of your balance as possible before interest kicks in after the intro period.

Credit Counseling

Figuring out the best credit card debt payoff strategy is a challenge. If you continue to struggle it could be worth seeking professional credit counseling to help guide you through a payoff plan. Non-profit organizations, such as the National Foundation for Credit Counseling (NFCC), offer free or low-cost credit counseling. 

Credit repair service scams are on the rise, so before you sign up for debt management plans, make sure to properly vet the business. Check for filed complaints through your state attorney general and local consumer protection agency.