it's bit tricky but depending on your financial situation... that way - you get to have more money in your pocket and also to give you an ability to make more money. When the time comes to pay off big debt, you're in good shape to do so.
Paying off bigger debt first will make you live on paycheck-to-paycheck. It's unproductive and depressing. What you can do is balance transfer your big debt to CC with 0% interest rate for say.... 12 months or so. You'll bite balance transfer fee but it's better than paying monthly interest rate accrued from big debt.
There are no credit cards that offer 0% interest rates for 12 months. Six months, yes, 12 months, no. It definitely helps to transfer a debt to a zero interest rate card but if you're not really making significant payments then the grace period ends, you're slammed with a high interest.
0% interest cards look good but how high is their interest when the grace period ends? you can be in a bigger mess than before if you didn't take advantage of the 0% period to make big payments without the added cost of interest. Secondly, if you don't make your payments or you are making late payments, that 0% interest rate gets cancelled.
The thing is, you think you have more money in your pocket if you dont make payments to your bigger debts but in actuality that's untrue - the banks want you to believe that but it's far from the truth.
Say you have a debt of $5000 and your annual interest rate is 12%
Your minimum payment is calculated at 2.5% (again, i'm just throwing in variables here) which means your first minimum payment would be $125.
At this rate, it would take you 219 months (18 and a half years)to pay off the debt and you would have paid $3, 180.55 in interest fees alone.
So, in total, you actually paid the bank $8,180.55 for a $5000 debt. That is not money in your pocket.
Now, most 0% interest cards I've heard of - they have high interest rates after the six month grace period ended.
So, let's say you decide to transfer your $5,000 debt onto a zero rate credit card and decided that you will pay the minimum for six months reducing your debt down to $4, 250.
Sounds great! you paid off $750 and $0 in interest.
Grace period ends. You're now dealing with 18% interest rate.
Let's say that because you believe it's better to pay off smaller debts first and deal with the bigger ones when you have money in your pocket, you opt for the minimum payments.
$4,250 + 2.5% minimum payments per month + 18% annual interest
It would take you 297 months (almost 25 years) to pay off debt in full and you would have paid back the bank in addition to your $4,250 dollars, $5,990.44 in interest.
This means you paid back the bank $10, 240.44 for a $4,250 loan.
So, if you cannot afford to pay off your balance in full or in part before the six month 0% interest grace period ends, you're back to the same old problem.
Assuming you were making only the minimum payments per month:
A $5000 debt on a credit card with 12% annual interest rate would take you 18.5 years to pay off and cost you $3,180.55 in interest fees.
$4,250 debt on a credit card that has 18% annual interest rate would take you nearly 25 years to pay off and cost you $5,990.44 in interest fees.
Honestly, the 0% interest card is a very very good idea if you intend to take advantage of it by paying off the bigger debt as much as possible rather than prioritzing paying back smaller debts first.