Should I pay off my mortgage or pay off my credit card debt first?

Our minimum monthly mortgage payment is $1,539.64. We owe $204,020 on a mortgage with a rate of 3.8750%. Our total credit card debt is $34,000 with an average interest rate of 12%. When we have extra funds each month, should we use them towards the paying off the principal on our mortgage or towards paying off our credit cards?

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Absolutely you should pay off the higher interest rate debt first. $1,000 extra principal toward the credit card saves you $10 in interest in the first month, and every motnh thereafter. $1,000 toward the mortgage only saves you $3.23 in interest each month. Plus, your mortgage interest may be an itemized deduction, meaning you won't pay as much in income tax. Your credit card debt is NOT deductible.

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