Which debt to pay first?

Experts say that to attack the debt with the highest interest rate first. But there are few factors that you need to consider before you prioritize which debt to pay off first.

Consider paying off the debt with highest interest rate as well as with no tax advantage first. Interest you pay on home mortgage in many cases is tax deductible. On the other hand consumer debt such as credit cards including store credit card interest is not tax deductible for many. If you are a small business owner and you use your credit cards to buy things to pay for your business expenses, your principal and interest may be considered as business expense and therefore, will be accommodated in Schedule C you file for your business.

Some prefer to pay off the lowest balance first regardless of the interest rate. This will have more of a psychological impact than a financial. If it makes you feel happier, pay it off with the knowledge that you still need to concentrate on higher interest rate debt.

If you get one of those low interest credit card offers in the mail, consider transferring some of your higher interest rate to a new lower interest rate card. Watch for any additional expenses.