By
9 January 2007

Q: I have three active credit cards. My VISA balance is $1,726, MasterCard is $330 and First Premier Bank is $248. I was thinking of paying VISA just the minimum monthly payment for a while. I was thinking of sending MasterCard $100 every month to keep the balance at a manageable level. And I send Premier Bank $20 every month.

In your opinion, is my plan a smart one and should I keep following it? Thank you.

A: Your plan seems fine since you only owe a total of $2,304. You should be able to knock out this debt very quickly, especially if you get a little more aggressive and try to pay $200 toward the debt each month, which would help you pay it off within 15 months if you don’t add more debt to the cards.

(Editor’s Note: In most cases, you’ll be able to cut your debt faster by first paying off the debt carrying the highest interest rate. Most credit counselors recommend prioritizing your repayment based on the interest rate - highest to lowest. However, this reader didn’t mention which of his credit cards has the highest interest rate.)

I might try this approach. Pay half toward First Premier Bank ($124 or more) when the next payment is due and pay the minimum required payment to the other two accounts. In two months, First Premier will be paid off. Then do the same with the MasterCard account paying $165 for two months in a row and paying the minimum Visa payment. Once the MasterCard debt is paid off you can focus totally on eliminating the Visa balance with a monthly payment of $200 or more.

Look for ways to free up cash flow by cutting expenses for the short term to help you pay as much as possible each month toward these debts. You are close to being debt free so stay focused!

Good luck and please keep us posted.

Mike "The DebtBuster" Schiano

Listen to a Money Minute with Mike at: http://www.inchargeradio.com/MoneyMinutes/default.aspx

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