A faster way to pay down credit card debt

Micropayments

by Bill Hardekopf


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Paying down credit card debt is similar to losing weight. We know it is good for us and we need to do it, but it is hard to find a program that we can stick to and accomplish our goal.

Both challenges may have the same solution: smaller portions more often. For credit card debt, this means making smaller payments throughout the month instead of one large payment at the end of the month. These are referred to as "micropayments."

While we are conditioned to pay our credit card bill once a month, consumers can actually make payments more often. Some banks and issuers allow payments to be made as often as once a day.

Why does increasing the number of payments make any difference? Micropayments can have a significant impact on the amount of interest you pay.

If you carry a balance, credit card companies charge daily interest. Make your payment at the end of the billing period, and you will pay interest on the full balance for that entire billing period. Pay more often and you reduce your balance and the interest you pay each month.

One easy strategy is to divide your monthly bill in half and pay that amount every two weeks. By the end of the year, you will have made 26 payments or the equivalent of 13 monthly payments. The extra monthly payment resulting from this payment plan will enable you to pay down your debt at a faster pace.

To make sure you keep to your schedule and don't run the risk of missing a payment, sign up for an electronic transfer of your funds to take place every two weeks. In addition, call your credit card company and verify that you can make separate payments and have it credited to your monthly minimum.

The smaller micropayments are a good psychological tool to take control of your credit card debt. They provide faster results and even a little immediate gratification that keeps you motivated. Instead of eating out or splurging on something that you don't need, you can immediately apply that money to your debt.

There are several other advantages to making micropayments when paying down credit card debt:

  • You have better control of your payments. If you are paid weekly or bi-weekly, money can slip away by the end of the month, and it is sometimes difficult to pull together enough for the minimum payment. Designate a specific day after you are paid to send in a payment for your credit card. Four $50 payments or two $100 payments are sometimes easier to make than a monthly $200 payment. It is also easier to add a little extra money to smaller payments.

  • The higher your interest rate, the more you will save. This is good news for the many cardholders who have recently received rate increases and now pay up to 30%.

  • In time, micropayments can help raise your credit score. An organized, scheduled payment plan can help you avoid late payments and pay more than the minimum due. Both of these are important elements for a good credit score.

  • Micropayments can reduce financial stress. Making payments right after payday at a time when you actually have the money reduces anxiety and financial stress.

The ability to save money and pay down credit card debt also makes the debt burden a little less overwhelming and can even give you a feeling of control.

The disadvantage to the micropayment plan is that it takes time, organization and financial discipline to make the plan work and this may be difficult for some people.

It takes time to pay down credit card debt and it is easy to give up after a few months. Stick with this because getting rid of debt is an important step for financial security.

If you have more than one card with a balance, keep paying the minimums for each card, but pick one card and pay it off first. Select either the card with the highest interest rate (save more money) or the card with the lowest balance (pay it off faster). Stop charging on that card, using another card for purchases. Make your minimum payment by the due date.

Ask your credit card issuer how often you can make a payment and if they have any restrictions or limitations. Some issuers have no limitations; others might only allow payment every third day. It can take as long as two to five business days for the payment to appear on your online credit card statement.


Bill Hardekopf is CEO of LowCards.com, a site dedicated to simplifying the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

Take the Next Step:

  • For more on paying down credit card debt, please click here.
  • Use Mint.com to manage your budget. It's so easy, you'll actually budget

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