How to Make Mini Credit Card Payments
Employ this Strategy to Wipe out Your Debt in Record Time
Feb 22, 2009
In the same way that many people pay their mortgage bi-weekly in order to make extra payments on their home and save thousands in interest over the life of the loan, you are employing that same strategy with your credit cards.
Employing this strategy will build a sense of gratification as you actively pay down your debt several times a month. You also won't feel burdened by these massive payments throughout the month. Not to mention, making multiple payments will almost all but ensure that you never miss one and get whacked with a late fee.
Total up Your Entire Amount of Debt
This includes everything that is not tax deductible. Tax deductible debt usually includes your home mortgage and student loans. Examples of debt that is not tax deductible are car loans, credit cards, furniture store loans, and electronic store loans.
Take a pen and paper and literally create three columns where you list the creditor, the amount you owe and your interest rate. Circle the highest interest rate. This is the creditor you want to pay off first in order to save yourself money over the long term.
Investigate what the Minimum Payments are on Each of Your Credit Accounts
Minimum payments vary between creditors. For credit cards it is usually 1 percent plus the monthly finance charges. For other accounts such as furniture or electronic stores, other rules may apply. Though because of congressional rules, (aside from some home loans) there will not be negative amortization on any of these accounts.
Also be sure to take a moment and write down when each payment is due during the month. Now you’ll have the entire schedule of how much you owe, how much needs to be paid to meet the minimum requirements, and when the creditor needs to receive payment.
Set up Automatic Payment with Each Credit Account
Setting up an automatic payment with each account will ensure that you don’t get whacked with late fees and that your interest rates do not inflate because of payment error. Pay the minimum due on each credit card with these payments.
Select Another Day to Make Another Payment
This will probably be different for each individual based on when and how often you are paid by employers. Select a day when you have 20 minutes or so to make an additional payment through your automatic payment system. Try to pay at least 1 percent of your total debt on this day. By doing this every month, you will pay an additional 12 percent over the course of a year. On a balance of $20,000 that adds up to an additional $2400.
Take Down the Credit Card with the Highest Interest Rate
For the credit card where you have the largest interest rate, it behooves you to pay it off as quickly as possible so that you pay the least amount of interest. So for your final “additional payment” each month, pay 2 percent of the total balance to that credit card. That adds up to 24 percent on that credit card per year. If the balance on that card was $10,000, that’s an additional $2400.
Read Other Action Plan Articles
Learn more about paying down debt by reading the associated artciles The Credit Card Debt Action Plan and More of the Credit Card Debt Action Plan.
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