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Is paying off a small debt first worth it if another card has a higher interest rate?

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I crossed out the $320 balance on a scrap of paper, then realised I hadn't paid it off. I'd just drawn what the page might look like.

I have two credit-card balances: about $320 at 18% APR and $2,400 at 27% APR. I'm making the required payments on both, my regular bills are covered, and I can put another $100 a month towards repayment. I don't have any promotional rate ending in the period I'm comparing, and I'm not adding new purchases.

The larger balance feels immovable. The smaller one feels like something I could actually finish. My partner says the higher rate should decide where the extra money goes. I understand that argument, but the idea of one less balance makes me want to stick with the plan.

How would you weigh the interest cost against that sense of progress? I'm looking for a way to make the trade-off visible, not a rule that pretending motivation doesn't matter will suddenly make me motivated.

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2 community replies

The CFPB's [debt reduction worksheet](https://www.consumerfinance.gov/documents/5782/cfpb_ymyg-toolkit_reducing-debt-worksheet.pdf) describes both approaches. Targeting the highest rate can save money; targeting the smallest balance can provide visible progress, though it may cost more overall. Neither approach means dropping required payments on the other account.

Before choosing, compare the estimated cost and payoff dates under both plans using your actual statements and terms. The $320 target may feel irresistible partly because the alternative is only an abstract warning about interest. An estimate would make the price of that early finish more concrete.

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