Congratulations on making this smart financial move! There are two ways to look at this. From a strictly economic viewpoint, you'll generally save the most interest and repayment time if you apply extra payments toward the credit card with the highest interest rate first. If two credit cards have the same interest rate, apply the extra $100 toward the card with the larger balance. In addition to the extra $100 per month, when you completely pay off a credit card balance, apply its previous monthly payment to one of your remaining creditors in descending order (that is, highest interest rate to lowest interest rate). But from another viewpoint, you may gain a psychological boost if you pay off the smallest balance first. That way, you can see immediate results from your strategy, which may help you continue to pay off debt. For some people, there may be a psychological advantage in going from making payments on five accounts to four to three as they get balances down to zero and reduce the number of accounts they are paying on. While this does not minimize interest, it may be more rewarding and motivating to some. Consider that another important part of your strategy should be to add no new debt while working to pay off current debt. For a personalized analysis of how much time and interest you can save by accelerating debt repayments, see www.powerpay.org. We would like your feedback on this Personal Finance Frequently Asked Question.

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