Money Fix: weighing what debt to pay off first

Sometimes emotions rule. There's an ongoing debate: Pay high-interest debt first, or pay smaller balances off first?

New research from Texas A&M University supports the theory that paying smaller bills first, no matter the interest rate, is enough of a psychological boost that it trumps the adage of going for the higher interest-rate debt first. So what should you do?

Know yourself. "If you're committed and disciplined, focus on the higher-rate cards first, but if small victories will motivate you to continue paying your debt, pay off lower-rate cards first," says Matthew Roseman, a law partner at Cullen and Dykman in Garden City.

The long view: However, Rochelle Odesser, vice president at Madison Planning in White Plains, counsels people to look at the interest rate on their debt and pay the higher one first. "In the long run, you'll save money because the interest charges on that debt will increase it the most."

That said, Stephanie Genkin, a certified financial planner in Brooklyn, says "getting rid of all of your [high-interest] credit card debt is the ultimate goal." But if you stop paying it down after five months because you don't feel like you're getting anywhere, "you won't stay the course and pay off all your debt."

Other considerations. Joel Murray, product director at Financial Education & Literacy Advisors in Washington, D.C., says, "Maybe you need an approach that improves your credit score as quickly as possible. Then it's best to repay the account that is closest to the credit limit. Do what's best for you."