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Comment by wisty | Hacker News Reader

Here's another strategy: break all your debts up into similar sized chunks. Draw a grid with all those chunks on a big sheet of paper, and post it up on the wall. Cross off the chunks as you pay them off (highest interest rate first). It's mathematically and psychologically correct!

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Crossing off a chunk on your grid does not reduce the number of nasty letters and phone calls you get from creditors.

You only get those phone calls if you're not paying anything at all to the creditors and or/ignoring their phonecalls. If you talk to your creditors explain your situation and are making payments, the phone calls and letters stop.

If you've fully paid off a debt then even if you fail to make payments in future its not coming back to haunt you. Also even apart from psychological considerations there is how soon until a creditor is likely to institute proceedings against you - it's probably sooner for smaller debts.

I have a friend who used to use what he called "the hat system": when a creditor phoned to complain about his account, he'd explain that every month, he put the names of everyone he owed money to in a hat, and then draw names and pay them until his debt paying budget was used up -- and everyone who phones to complain doesn't go in the hat that month.

People in debt do strange things.

One sticky issue: you may not know what the interest rate actually is for the chunk you paid.

e.g.

    1. Charge $100 at the grocery store, 12% APR
    2. Pay off $10
    3. $200 Cash advance from ATM, 20% APR
    4. Pay off $10

Guess what, you have several $10 chunks to pay off, but at various interest rates. Most issuers pay down the lowest APR first, regardless of any chronological ordering. So if you know the policy, you should be able to figure it out, but if you continue to charge while you are paying down your debt, there could be a lot of chunk-juggling to maintain a sane view of what you owe.

> Most issuers pay down the lowest APR first

As of fairly recently, that's supposed to be illegal here in the US now (supposedly there are loopholes about "accidentally" giving people business instead of individual cards).

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