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Card #1 has a 8K balance at 9.99% To make the math easy, assume that the minimum payment is \$100/month.

Card #2 has a 4K balance at 0\$ until April. But if it's not completely paid off before April 2, then a 20% APR will apply retroactively to October 1 of 2013.

If I have \$4000 right now, and will be able to pay \$1100K /month toward debt reduction, how should I allocate that \$4K lump sum and the \$1100 monthly to minimize my interest payments?

So, if Card #2 is not paid by 4/xx/15 (you need to confirm what date the retroactive interest will kick in), it will definitely have the highest interest rate. Assuming that from Jan - March, you will DEFINITELY be able to put \$3300 toward debt payment, (Note - you need to be really sure of this - no "I think I can, unless....." is allowed), here is my suggestion:

Put \$1k into a savings account now, and use the other \$3k to pay down Card #1. Then, for the \$1100 you will put toward debt repayment in Jan and Feb - pay the \$100 minimum payment to Card #1 and make the minimum payment (\$40?) to Card #2. Add the rest to the savings account. In March, take the savings account balance, plus the part of the \$1100 that is needed to pay the balance on Card #2, and pay it off. That will pay the debt off about 1 month prior to the retroactive rate kicking in, and give you time to straighten out any issues that may occur. Take the rest of March's \$1100 and put it toward Card #1. In April, start putting the \$1100 toward Card #1 - you should pay it off in September.

If you are not DEFINITELY sure that you will be able to put \$1100/month toward debt reduction, paying Card #2 off now is probably the safer alternative, if your goal is to minimize your interest payments.

AJ

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