First, focus on paying off high-rate, non-secured debt – this is the balance that’s costing you more money. Credit card debt falls under non-secured because there are no assets to back it up. A mortgage, on the other hand, is secured debt because if you default, the bank can foreclose on your house and cut its losses.

Your least concern – low-rate, secured debt. Car loans, a home mortgage and student loans fall in this category.

A couple of exceptions to the rule:

• Is your credit shot? Then you might want to rethink paying off the highest-rate card first and try to reduce your principal, recommends Torabi. Why? If you have a low credit score, reducing your debt-to-credit limit ratio is the key to improving your chances of being approved for a car loan or other credit venture. Consider this strategy if you have a loan application looming.

• Taking it to the max? Approaching your credit limit on one of your cards is not a good idea because you will get penalties such as an increased rate on all your credit cards. So pay down the balance on that one bad apple and save yourself the trouble of higher interest, suggests Torabi.

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