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URL:  http://boards.fool.com/thanks-all-for-the-replies-on-the-other-topic-15016192.aspx

Subject:  Re: HELP! WHich card should i pay off first?? Date:  5/22/2001  8:38 AM
Author:  aja91 Number:  71954 of 308695

Thanks all for the replies on the other topic, yall have been a big help. I just found out today that im getting $5000 dollars next week from an insurance claim. Now i need yall's expert advice on which one i should pay off first. I just want to make sure i dont spend it on the wrong credit card. Here are the cards i owe on:
1)Visa balance- $9000 int rate- 16.9%
2)Visa balance $7500 int rate 12.9%
2)Discover $8500 int rate 9.9%
2)Mastercard $2400 int rate 19.9%
3)Mastercard $2600 int rate 17.9%


If you're getting $5,000, pay off the two MasterCard balances. They are the highest rates and you can clear them out entirely. Then take the payment you were making on those two cards and add that amount, plus any additional money you can pull together, to the payment for Visa#1 until you pay it off. Roll the full payment you'd been making on Visa#1 towards Visa#2, and finally the Discover card. You are "snowballing" the payments to pay off the balances as quickly as possible. Note that any extra money is applied to the card you are focusing on, don't split the money between cards -- the others just get minimums.

That's the approach to take if you want to pay of the credit cards first.

Regarding the car, if you trade it in (I think you're implying trading down to a less expensive car?), you'll be back in the same boat of being upside-down on the loan almost as soon as you get the new car. Since you'd be taking the entire $5000 lump sum plus additional money to get out the existing car, you'd presumably not have additional cash reserves to buy a used car for cash, so you'd be taking out a loan again. Now, if you had another $5-6k laying around, that's a good approach (sell the current car, pay off the loan, buy a reliable used car with the remaining $4-5k, then apply the $1093 former car payment to the credit card "snowball" described above).

Hope this helps.
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