Which Debt to Pay Off First: Credit Cards vs. Installment Loans

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Focus on credit card debt first
Build your credit score
Focus on interest rates, save money
Remember tax benefits
Watch the calendar
One exception: When the loan is a payday loan
- It’s best to pay off your highest interest rate debts first. Even if you think you have a high rate on your credit card, payday loans are still worse. The interest on a payday loan can translate to an APR of 390% and sometimes as high as 600%.
- Payday loans can lead to a debt spiral. If you can't pay in full on the first payday, a new finance charge is added and the cycle repeats. Within a few months, you could end up owing more in interest than the original loan amount.
- Unlike credit card companies, most payday loan lenders won’t let you consolidate your debt.