What’s the best approach to paying off a credit card bill?

by Timothy C. Hilbert, CPA | Jan 01, 2015
askacpaicon Interest rates on credit cards are usually very high (sometimes the high rate is deferred until after a promotional low-rate period), the compounding of interest can cause balances to grow significantly if only the minimum payment is made each month. Frequently, this is the real reason consumers run into credit card debt problems.

The best practice is to pay off as much of a credit card balance as possible each month. If it is not possible to pay the total balance, every effort should be made to pay an amount in excess of the minimum amount due. Consumer should attempt to pay the total interest outstanding on the month’s bill plus a portion of the outstanding principal. 

If credit card debt is a problem, it might be appropriate to cut up the credit card until balances are paid off. 

Answer By: Timothy C. Hilbert, CPA, is a director with Kreischer Miller in Horsham.
Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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