Tackling Debt: Start with the Credit Cards

When it comes to tackling debt, it can be difficult to decide what you should tackle first.

The good news is that it doesn’t have to be a tough choice.

Start with the credit cards, and you are likely to see good results. This is because credit cards generally have high interest rates.  If you start with your credit cards, you are more likely to get rid of the highest rate debt first, and let you concentrate on other debt later.

Paying Down High Interest Debt

Interest rates can have a big impact on what you end up paying overall.

A high interest rate means that more money is going into someone else’s pocket, and not reducing your principal (that’s the amount you originally borrowed).  With a credit card, the high interest can mean that only a small portion of your payment actually reduces the balance.  This means that you can spend years, and hundreds of dollars, paying off a credit card.

Take a look at your credit card statement.  You’ll find a chart that shows you how long it will take to pay off your your balance under a few circumstances, like paying just the minimum balance.  Take a close look, really.  The time frames and amount you will pay is quite sobering!

It makes sense to focus your debt reduction efforts on credit cards first.  That way, you can consciously use a plan, like the debt snowball, to pay off more of the principle and reduce your debt more effectively.

Credit Cards Don’t Offer Tax Advantages

tackling credit card debt

When you are tackling debt take a look at your credit card debt first.

Not only are most credit card interest rates higher, you will also find that credit cards don’t offer tax advantages.

A mortgage loan comes with a mortgage interest tax deduction (if you itemize), and student loan interest paid is also a deduction.

While these tax benefits don’t completely offset the cost of interest, they can alleviate it somewhat.  A credit card, though, doesn’t come with any of these benefits.  You pay your interest, and there is no offsetting tax deduction to help you reduce the costs of the situation.  If you concentrate on reducing your credit card debt, you can still get the benefit of tax deductions on your other types of debt.

Type of Credit Card Debt to Concentrate On

You should also be aware of the importance related to the type of credit card you concentrate on.

Many department store credit cards will have a slightly more negative effect on your credit history than a card issued by a major bank.  Department store credit cards also have notoriously high interest rates, and poor rewards programs, making it hardly worth to continue using them.

Tackle these types of credit cards first, and you can help you credit score a little bit, as well as get rid of what might be your highest interest debt.  This is important, since you can save more money over time if you get rid of high interest debt first.


While it’s important to just get started with debt reduction, it is possible for you to improve the process, and to save more money over the course of your debt reduction efforts, by making a plan.

Tackle the credit cards first, and choose the high interest, low benefit cards.  Paying down your debt on those cards, and you will be more likely to see better overall results in your efforts to improve your financial situation.



Published or updated August 14, 2012.

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