MoneyRates.com monthly resolution #9: Prioritize credit card debt to minimize interest payments

MoneyRates.com rang in this year by suggesting 12 monthly resolutions for 2010. With September's resolution, you can save money by better organizing your credit cards. This month, resolve to eliminate debt from high-interest credit cards.

How can you do this? It really boils down to prioritizing your credit cards for both payments and purchases.

6 steps to paying down your credit cards faster

If, like most consumers, you carry more than one credit card, organize how you use those cards so you pay the least amount of interest possible. Here's how:

1. Take all your cards out of your wallet. List all your credit cards and the interest rates associated with each one, focusing on the rate applied to purchase balances. The 2009 Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act") touched off a flurry of interest rate changes before certain regulations went live, but much of that interest rate activity has settled down now.
2. Rank order those cards by interest rate, from high to low.
3. Now just put some of the lowest-rate cards back in your wallet. Keep the others in a safe place, but where you are unlikely to use them.
4. If you carry balances on your cards, pay as much as possible on the highest-ranked card. Keep up with the minimum payments on all the others, so you don't incur penalties and damage your credit rating, but otherwise pour as much as you can of your monthly savings into paying down the highest-rate card.
5. When that high-rate balance is paid off, direct your largest payments to the next-highest-interest card.
6. As you pay off balances on higher-rate cards, cancel them. Closing accounts can temporarily lower your credit score, but if you ran up balances on them in the first place, it may be safer in the long run not to tempt yourself.

Watch credit card fees as well

Since the 2009 Credit CARD Act cut down on the ability of credit card companies to raise interest rates, some card issuers have been making it up by raising annual fees, balance transfer fees and other charges.

Read the terms and conditions to make sure you know all the costs associated with each card. Confused about the terms and conditions? Learn your rights as a credit card holder by checking out the Federal Reserve's consumer resources. You'll be better able to prioritize which cards you want to keep and use.

The steps are simple, but adhering to them is not. Stay motivated by thinking about how good it'll feel to stop shoveling money toward your credit card bills and directing it instead to your savings account.

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