I think I've found a way to pay off my credit cards faster, and therefore paying less interest rate. There's a Google Spreadsheet with my work at http://goo.gl/NqliZM
My question
What payment strategy will save me the most money? From my spreadsheet, I believe my idea actually works (saves me money), but is this reasoning actually correct?
Explanation
My scenario is this: I have 2 credit cards, both maxed out at \$5000. Credit card A has an interest rate of 10%, and card B has a rate of 20%. I have unlimited and free balance transfers from card B into card A. So my idea is this:
I only have a fixed \$300 to put on these cards every month. I could either pay \$150 on each card, or pay \$300 on card A, then transfer \$300 from card B into card A. I've checked with my bank, and they assured me I can in fact do this if I so choose.
My conclusion
Based on the results from my spreadsheet, I'd end up paying about 33% less interest total (\$2,145.71 vs \$3,180.98) if I use the strategy where I pay the entire \$300 on one card, then transfer that amount onto the other card. Can someone with more experience verify that this is in fact correct?
Edit
By transferring from card B to A I mean doing a credit card balance transfer. Meaning bank A cuts me a check, which they take from my credit line, then I pay that check to bank B, which lowers my debt with them.
Month 1:
Card A - balance: $5,000
Card B - balance: $5,000
Pay $300 on card A
Card A - balance: $4,700
Card B - balance: $5,000
Transfer $300 from card B to A
Card A - balance: $5,000
Card B - balance: $4,700
// --------
Month 2:
Card A - balance: $5,000
Card B - balance: $4,700
Pay $300 on card A
Card A - balance: $4,700
Card B - balance: $4,700
Transfer $300 from card B to A
Card A - balance: $5,000
Card B - balance: $4,400
just to finish the question
it is best to pay off credit card B ( because this one has the highest interest rate) as soon as possible.
I think if you just pay 300,-- to card B you can get problems with card A, so probably you need to pay something to card A.
if card A allows you to make new debt max it out , but only use it to reduce the debt on card B.
Mathematicly just paying off card B is best , but there can be some juridical problems with that solution, but try to get as close as possible.