Title: QUIZ: What Is the Best Strategy for Paying Off Credit Card Debt? -- Page One Economics®
Course: FRE Resources > Section: What Is the Best Strategy for Paying Off Credit Card Debt? -- Page One Economics®

Q: An example of an unsecured loan is
- a loan to buy a home.
- a loan to buy a car.
- credit card debt.
- a loan to buy business equipment.
A: credit card debt.

Q: If you are applying for a credit card and a car loan at around the same time, which is more likely to have a lower interest rate?
- A credit card
- A car loan
A: A car loan

Q: Use the table below to answer the question. Suppose Irving has the following credit card debt and has adjusted his budget so that he has $300 per month to pay off this debt:

The table includes information about two of Irving's credit cards: Credit card 1 has a balance of $6000, a minimum payment of $120, and an interest rate/APR of 22%. Credit card 2 has a balance of $2000, a minimum payment of $30, and an interest rate/APR of 12%.
Irving's Credit Cards | Balance | Minimum payment | Interest rate/annual percentage rate (APR)
Credit card 1 | $6,000 | $120 | 22%
Credit card 2 | $2,000 | $30 | 12%

If Irving decides to use the strategy advised by many personal finance gurus—the snowball method, or paying off the card with the smaller balance first—how much of his $300 budget would he initially devote to each credit card?
- $0 to card 1; $300 to card 2
- $120 to card 1; $180 to card 2
- $225 to card 1; $75 to card 2
- $270 to card 1; $30 to card 2
A: $120 to card 1; $180 to card 2

Q: Use the table below to answer the question. Suppose Irving has the following credit card debt and has adjusted his budget so that he has $300 per month to pay off this debt:

The table includes information about two of Irving's credit cards: Credit card 1 has a balance of $6000, a minimum payment of $120, and an interest rate/APR of 22%. Credit card 2 has a balance of $2000, a minimum payment of $30, and an interest rate/APR of 12%.
Irving's Credit Cards | Balance | Minimum payment | Interest rate/annual percentage rate (APR)
Credit card 1 | $6,000 | $120 | 22%
Credit card 2 | $2,000 | $30 | 12%

If Irving decides to follow economic theory and pay off his higher-interest rate card first, how much money would he initially devote to each credit card?
- $120 to card 1; $180 to card 2
- $225 to card 1; $75 to card 2
- $270 to card 1; $30 to card 2
- $300 to card 1; $0 to card 2
A: $270 to card 1; $30 to card 2

Q: Use the table below to answer the question. Suppose Irving has the following credit card debt and has adjusted his budget so that he has $300 per month to pay off this debt:

The table includes information about two of Irving's credit cards: Credit card 1 has a balance of $6000, a minimum payment of $120, and an interest rate/APR of 22%. Credit card 2 has a balance of $2000, a minimum payment of $30, and an interest rate/APR of 12%.
Irving's Credit Cards | Balance | Minimum payment | Interest rate/annual percentage rate (APR)
Credit card 1 | $6,000 | $120 | 22%
Credit card 2 | $2,000 | $30 | 12%

If Irving decides to do what most Americans do, which is split his money proportionally between both accounts based on the size of each card’s balance, how much money would he initially devote to each credit card?
- $0 to card 1; $300 to card 2
- $120 to card 1; $180 to card 2
- $225 to card 1; $75 to card 2
- $270 to card 1; $30 to card 2
A: $225 to card 1; $75 to card 2

Q: Use the table below to answer the question. Suppose Irving has the following credit card debt and has adjusted his budget so that he has $300 per month to pay off this debt:

The table includes information about two of Irving's credit cards: Credit card 1 has a balance of $6000, a minimum payment of $120, and an interest rate/APR of 22%. Credit card 2 has a balance of $2000, a minimum payment of $30, and an interest rate/APR of 12%.
Irving's Credit Cards | Balance | Minimum payment | Interest rate/annual percentage rate (APR)
Credit card 1 | $6,000 | $120 | 22%
Credit card 2 | $2,000 | $30 | 12%

Assuming Irving sticks to a repayment plan, which method would be fastest and save money (compared with the other options)?
- The snowball method
- The economic theory method
- The method that most borrowers follow
- Any of the three methods
A: The economic theory method

Q: Why do many personal finance gurus suggest paying off the credit card with the smallest balance first?
- Paying off the credit card with the smallest balance first saves borrowers money because it is the cheapest way to pay off debt.
- Paying off the credit card with the smallest balance first saves borrowers money because it is the fastest way to pay off debt.
- Paying off the credit card with the smallest balance first is the best way to increase your credit score.
- Paying off the credit card with the smallest balance first gives borrowers a victory and builds momentum for paying off all the debt.
A: Paying off the credit card with the smallest balance first gives borrowers a victory and builds momentum for paying off all the debt.

Q: According to the article, which strategy is ultimately the best option?
- The option that gets you to pay off the total debt balance.
- The option that targets the high-interest debt balance first.
- The option that targets the smallest debt balance first.
- The option that splits repayments based on the size of the debt balance owed.
A: The option that gets you to pay off the total debt balance.