If you’re in credit card debt, you’re likely more than aware of the damage that those interest rates can do to your wallet.
Did you know there’s a simple trick to lower the amount of interest you’ll owe on your balance each month?
Money expert Clark Howard recently discussed how making more than one payment to your credit card balance each billing cycle will help you eliminate the amount you owe more quickly by lowering the interest accrued.
Depending on your situation, this method could save you hundreds of dollars over time!
Let’s look at what Clark told a listener about this simple trick on a recent episode of the Clark Howard Podcast and then discuss some additional strategies for eliminating credit card debt.
Ask Clark: Will Multiple Payments Per Month Help Pay Off Debt Faster?
During a recent question and answer segment of the podcast, Clark received an inquiry from listener Diane in Georgia. She asked about making multiple payments per month on a loan as a means of lowering the principle owed and paying it off faster.
Clark’s response included details about how best to do this for mortgages but gave a green light for using this practice on your credit card debt.
Question from Diane in Georgia:
“Is it true that you can pay off your mortgage faster if you send the monthly payment in two payments each month? Also, I pay extra principal each month. Should that also be sent in two times?”
Answer from Clark:
“Diane, what you’re talking about works with credit cards. If you’re running a balance on cards, paying them twice a month instead of once a month will save you a substantial amount of money over time. You’ll save even more if you pay them every two weeks — every 14 days — instead of twice a month. And that’s all about the fact that you end up with basically a whole extra month’s payment over the course of a year doing that. And it’s because interest on credit cards is figured daily.
“Mortgages in the United States — and maybe only in the United States — have interest that is calculated on a monthly basis. So you’re not getting any advantage by paying in two cycles in a month. But you are getting a significant advantage from paying extra principal. So pay once a month and pay the extra principal when you send in that payment and that will have a meaningful benefit for shortening the length of your mortgage.”
Other Things To Consider When It Comes to Credit Card Balances
If you find yourself in credit card debt, following Clark’s advice of sending in a payment every 14 days rather than once a month should help you chip away at the balance more quickly. Even if it’s the same amount you were going to pay in one lump sum, you’ll gain by avoiding the daily compounding interest on the portion of your balance you pay off.
That’s a great place to start.
But we also want to give you some other tools and resources to avoid paying credit card companies more of your cash.
- Set a plan and stick with it. Team Clark has a six-step process for getting out of credit card debt in three years or less. You can use a credit card repayment calculator to help set an aggressive– but realistic– goal for paying things off.
- Seek a low APR card from your local credit union. If you don’t have credit card debt yet, but are anticipating that you may encounter a situation that will cause you to run a balance in the future, visit your local credit union. They often have the lowest variable APR available on credit cards, with some reaching as low as 8 or 9 percent. Avoid rewards credit cards for running a balance, as variable APRs on these cards can exceed 25%.
- Consider a balance transfer APR offer, but be alert. If you’re already battling credit card debt, a 0% introductory APR period from a balance transfer credit card could offer you a temporary respite from those interest charges. But be careful. You’ll need to assess whether the card charges a balance transfer fee and avoid spending with the new card. In some cases, they’ll try to bait you into new spending with an accompanying 0% APR on new purchases.