When it comes to managing that little slice of plastic in your pocket, it’s not as simple as
just writing a check every now and then. There are strategic ways to best manage credit
cards, and the reward is great credit and little to no fees or interest. Now that we’ve
passed the 2011 holiday season, paying off your retail cards should be the first thing on
Now, paying off credit card debt shouldn’t be a random act of simply writing checks
to your credit card issuers. There are better ways of attacking your balances. One
of the most common way of choosing which card to pay first is to simply rank them
based on their interest rates and pay off the highest rates first. It’s a simple exercise
done manually, or using a spreadsheet program if you’ve got a lot of credit cards with
This “ranking” method of paying balances is perfectly fine because you’re exhausting the
most expensive debt first. However, it’s also a smart strategy to knock out lower balance
cards, which I call nuisance balances. Eliminating accounts with balances from your
credit reports yields higher credit scores and it’s nice to not get statements the following
month. You could also attack the balances that are the closest to the credit limit. This
also benefits your credit scores and can keep other credit card issuers from increasing
your rates or closing your accounts.
One thing that’s a must is making sure all of your cards are getting their taste of your
money each and every month. That means making at least the minimum payment even
if you’re not planning on paying extra toward the principle balance. It would be a credit
score disaster if you chose to miss payments simply to throw more money at another
There’s also a financial benefit to paying off your retail store credit cards first. The
interest rates on those cards tend to be at least 40% higher, on average, than the rates
on general use credit cards. You wallet will thank you for paying those off first.
“The Credit Guru”, Longtime FICO Insider & Credit Industry Authority President Of The Ulzheimer Group, LLC
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group, the Director of Credit Education at DisputeSuite.com, Credit Expert at CreditSesame.com and the credit blogger for Mint.com. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 150 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
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