There is no rule of thumb in choosing what payment strategy to employ. It will greatly depend on your current financial situation, plan and priorities. One approach has its own advantages and disadvantages compare to another. Try to evaluate each strategy and see for yourself which one makes sense.

There are credit card companies that will raise interest rate for just one late payment of bills. It is better to avoid any additional fees or charges that will apparently add to your total debt payments. Try your best to meet up the minimum payments on all your debts and you will be surprised how little by little your debts start dropping. It will also motivate you to keep on going with your payment strategy until the time you get out of debt.

For people with enormous total debts, high interest rates make it more difficult to get out of it. You can talk to your credit companies and discuss some options to lower the interest rate. One of the most frequent used rate reduction programs is loan consolidation. Reduced interest rates means increased in payments on credits’ balances with no increase in total payments.

Assuming you owe $2,000 on each 3 debt accounts. The interest rates are 10%, 14% and 20%. Paying the debt with the highest rate will save you more in interest payments over the succeeding years than paying the debts with lower rates. This strategy is simply keeping your total interest payments to the least amount as possible.

There are people who just can’t stand the sight and effect of various monthly payments coming in and it keeps them more upset. If this is your case, you may want to try this strategy. Pay the debt with the lowest balance. In this way, it will trim down the number of payments in an instant. For example, if you have outstanding balances of 5 debts accounts with amounts of $300, $500, $3000, and $4000, pay up the $300 and $500 debts and you are instantly rid of 2 payments. To some people, it means they just have to worry 2 more debts instead of 4.

You may ask “Why pay $500 if I am only required to pay $300?” the answer is simple. The less you pay on your debt payments the longer it will take you to get out it. Some credit companies even lower their interest rates and claim that this would help their debtors with their financial crisis. But on the other side this is also another way to encourage people to pay just the minimum amount knowing that their interest rate is “lowered”. This will result to more income for credit companies and longer debt maze on your part.