Question for the Money Doctors

Question submitted on Mar 19, 2021.

Question

If I owe several credit card balances due to divorce, and I come into a windfall, how do I decide which balances to pay off? I need to reduce the money I have going out monthly and I don't know how to determine how a lump sum payment would affect the overall balance. Can you help?

Answer

First, look at the cards with the highest interest rates, these are costing you the most monthly. Calling the credit card company is the best way. They can tell you if you pay in a lump sum say as am example $2500 or $5000 what that would do to your minimum payment monthly. I suggest doing a cash flow budget and see the most you can pay off with this windfall. That will save you the most costs in the long term.

Good luck.

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