Pay the highest-interest debt first, this is the avalanche method. A credit card at about 23.79% APR (Federal Reserve G.19) almost always costs far more per dollar than a car loan at about 9%, so the card usually comes first. For every $1,000 you owe, the card costs roughly $237.90 a year in interest versus about $90 on the auto loan. Clear the card, then send that freed-up money to the car.
You have a credit card and a car loan, and enough extra money to attack one of them. Put every extra dollar on the debt with the highest interest rate. For most people that is the credit card, and the gap is bigger than it looks.
It feels natural to want the car loan gone. It is a big, round number, and paying it off means the car is finally yours. But "which debt feels heavier" and "which debt costs you the most" are two different questions. The math only cares about the second one.
Here is the simple rule, and then the numbers behind it, so you can see exactly why the card wins, and the one situation where it does not.
1. Which Debt to Pay First, and Why
The answer is the avalanche method: make the minimum payment on every debt, then throw every extra dollar at the one with the highest interest rate. When that debt is gone, roll the money to the next-highest rate. Because it always attacks the most expensive rate, the avalanche method saves you the most money overall.
So the real question is not "car loan or credit card." It is "which one has the higher rate?" As of the Federal Reserve's most recent Consumer Credit (G.19) release in 2026, the average APR on cards that carry a balance sits above 22%, and many run higher, the 23.79% used here is a realistic mid-range rate. Auto loans, by comparison, average around 9% for a used-car loan (Experian, 2026). That is not close.
A higher rate means each dollar of that balance costs you more every single day it sits there. So even though the car loan is usually a much bigger number, the card is the more expensive debt per dollar, and that is what decides where your extra money goes.
2. The Math: It Is About Cost Per Dollar, Not the Monthly Charge
This is where people get tripped up. The auto loan often shows a bigger raw interest charge each month, just because the balance is bigger. That makes the car loan feel like the costlier debt. Watch what happens when you line them up.
| Debt | Balance | APR | Interest This Month | Cost Per $1,000 / Year |
|---|---|---|---|---|
| Credit Card | $6,600 | 23.79% | $130.84 | $237.90 |
| Auto Loan | $30,000 | 9% | $225.00 | $90.00 |
Look at the two middle columns first. The auto loan charges $225 in interest this month and the card only $130.84, so the car loan looks worse. But that is only because the car balance is more than four times bigger. The moment you measure both debts on the same footing, cost per $1,000 owed, the picture flips.
The card costs $237.90 a year for every $1,000 on it. The auto loan costs just $90 a year per $1,000. That means every extra dollar you put on the card kills interest about 2.6 times faster than the same dollar on the car. A dollar is a dollar, send it where it stops the most interest.
Every extra dollar aimed at the 23.79% card wipes out about 2.6 times more interest than a dollar on the 9% car loan, $237.90 per $1,000 a year versus $90.
This is exactly the logic behind the debt snowball vs. avalanche calculator: rank your debts by rate, then feed your extra money to the top of the list. The card sits above the car, so the card gets fed first.
3. The Exception: When the Car Loan Comes First
The rule is "highest rate first," so the exception is simply: pay the car first when the car is actually the more expensive, or more dangerous, debt. Three cases flip the order.
Your car loan rate is higher than your card rate. This can happen with a subprime auto loan or a card sitting at a true 0% promotional rate. If your card is at 0% for now, the car loan is your most expensive debt today, attack it. Just note when the promo ends, because the card can jump to 25%+ overnight.
You are behind on the car and at risk of repossession. Missed a card payment and you get a fee and a credit ding. Miss enough car payments and the lender can take the car, the car you may need to get to work. If repossession is a real risk, protecting the car can matter more than the pure interest math.
The car loan is almost paid off. If the car has one or two payments left, finishing it frees up the whole monthly payment to throw at the card. That is a judgment call, not a rule, but a nearly-done loan can be worth clearing to free up cash flow.
Want to see how fast extra payments kill your car loan?
The Loan Extra Payment Mini Guide shows you, in plain English, exactly how much time and interest each extra dollar shaves off an auto or personal loan, in about ten minutes.
4. See Your Real Numbers
The example above uses round numbers. Your card and your car have their own balances and their own rates, and the only figures that matter are your actual APRs. Pull both statements and write down the APR on each one.
Whichever rate is higher gets your extra money. To see how quickly the car loan itself disappears once you add extra payments, run it through the free auto loan calculator, put in your balance, rate, and monthly payment, then add an extra amount and watch the payoff date move closer. It makes the trade-off concrete instead of theoretical.
5. Common Mistakes People Make
Chasing the biggest balance instead of the highest rate. The car loan is usually the bigger number, so it feels like the priority. But size is not cost. The 23.79% card quietly costs more per dollar than the 9% car loan, even though the car balance is larger.
Comparing monthly interest charges instead of rates. The auto loan can show a bigger dollar figure just because the balance is bigger. Always compare the APRs, or the cost per $1,000, not the raw monthly charge.
Ignoring a 0% promo that is about to end. A card at a true 0% teaser rate really is cheaper than the car loan, for now. If you ride that logic past the promo date, the card can jump to 25%+ and become your most expensive debt overnight.
Splitting extra money evenly between both. Spreading your extra $200 across both debts feels balanced, but it is slower and costs more. Put the whole extra amount on the highest-rate debt until it is gone, then roll it to the next one.
FAQ: Car Loan vs. Credit Card
Should I pay off my car loan or my credit card first?
Pay off the debt with the highest interest rate first, this is the avalanche method. A credit card at about 23.79% APR almost always costs far more per dollar than a car loan at about 9%, so the card usually comes first. For every $1,000 you owe, the card costs roughly $237.90 a year in interest versus about $90 on the auto loan. Clear the card, then send that freed-up money to the car. You can model the car's payoff with the free auto loan calculator.
Why does the credit card cost more if the car loan has a bigger monthly interest charge?
The auto loan can show a larger raw interest charge simply because the balance is bigger. A $30,000 loan at 9% charges about $225 in the first month, while a $6,600 card at 23.79% charges about $130.84. But what matters for which debt to attack is the cost per dollar. The card costs about $237.90 a year for every $1,000 owed; the auto loan costs about $90. Every extra dollar aimed at the card saves you roughly 2.6 times more.
What is the avalanche method?
The avalanche method means you make the minimum payment on every debt, then throw all your extra money at the debt with the highest interest rate. When that one is gone, you roll the money to the next-highest rate. Because it always targets the most expensive rate, the avalanche method saves the most interest overall. Between a 23.79% card and a 9% car loan, the card wins the top spot. See the snowball vs. avalanche calculator to rank your own debts.
When should I pay off the car loan first instead?
Pay the car loan first if it costs more or carries more risk than the card. That happens when the car loan's rate is actually higher than the card's, when the card sits at a true 0% promotional rate, or when you are behind on the car payment and at real risk of repossession. Protecting the car you need to get to work can outweigh the pure math. Outside those cases, the higher-rate card comes first.
Does paying off the car loan help my credit score more than the card?
Usually the opposite. Credit card balances are revolving debt, and a high card balance relative to your limit hurts your credit utilization, one of the biggest factors in your score. Paying the card down often helps your score faster than paying off an installment loan like a car. That is another reason the card tends to come first.
How do I figure out which of my debts has the highest rate?
Find the APR on each statement, it is printed on your credit card bill and in your auto loan paperwork. List every debt from the highest APR to the lowest. Pay the minimum on all of them, then send every extra dollar to the one at the top of the list. You can model the payoff for the car with the free auto loan calculator to see how much faster extra payments finish it.
