Small extra payments equal big savings
The trick to paying off a credit-card balance faster (and boosting your credit score at the same time) is to pay something extra every month, even if it’s only a few dollars.
Let’s say you have a credit card with a $1,000 balance and the interest rate is 18 percent.Your minimum monthly payment is likely around $25 per month. Making only the minimum payment will take you 155 months to pay off the balance.
That includes $1,129.13 in interest — more than the original debt. If you add a mere $5 each month to your payment, you would pay off the debt in 47 months and the interest you would pay is $396.72.
That’s a savings of $732.41 in interest alone. Put another way, every extra dollar in this example equates to $3 in saved interest.
Where are you going to get that extra $5 per month (or any extra money) when you’re already on a very tight budget? Anywhere you can, because as the example shows, that $5 translates into big money — the interest you won’t be paying.
Here are a few ideas not only to “find” that $5, but any extra money to put on the credit cards:
“Don’t spend your change. Empty your pockets every night and put the coins in a jar.
“Take a Thermos of coffee from home and skip the expensive coffee stop every day.
“Have breakfast or sandwiches one night per week for dinner.
“Buy store brands on canned goods and calculate your savings.
“Before you make a phone call, put a quarter next to the phone.
“Raise the deductible on your auto insurance.
“If you absolutely need a new jacket or dress, check a second-hand store first.
“Ask if the PMI can be taken off your mortgage.
“Shop for groceries with cash, a calculator and a list. When you’re out of money, stop shopping.
“Put a $5 bill (or larger) behind a photo in your wallet. If you haven’t spent it by the end of the month, put it toward the credit-card bill.
Finding extra money to pay on credit cards can sometimes be difficult, but every dollar you pay over the minimum calculates into bigger dollars you don’t pay in interest.