Are you making the minimum payment on your credit card every month but it seems like the balance is not decreasing? Do you want to pay down your debt but you currently don’t have a large amount to put towards your debt every month? Well, guess what, you don’t need to put a large amount of money to see your credit card balance decrease.
You can always start small, by putting an extra $5, $10 or even $20 dollars extra towards your credit card payment every month, which will help you pay off your credit card faster. But if you really want to make a dent in your credit card balance you need to change the way you think about your minimum payment.
Instead of thinking of your minimum payment as, for example, $25 per month. Your minimum payment will now be the minimum amount plus the interest charges.
Credit Card Statement Minimum Payment: $25
Interest Charged: $10
Your minimum credit card payment is now: $35
As your balance decreases so will your interest payment which may tempt you to decrease your payment but do not do it. Keep your new minimum payment the same (unless you are increasing it) so you can pay off your debt faster.
Paying more than the minimum payment on your credit card will save you money in the long.
The screenshot below is from one of my client’s credit card bill. The balance is approximately $2,280 at 19.99% interest (about $43 a month) and the minimum payment is $63.
If my client does not charge anything else to this card and pays the minimum payment it would take her 15 years to pay off this card.
If she pays just $23 more each month, she will pay off her credit card in 3 years.
If she pays $106 ($63 minimum payment plus $43 monthly interest) and sticks with that payment amount she will pay her credit card off in 2 years and 3 months, which will allow her to put that money towards her goals.
So if you are looking to put a dent in your credit card debt and you don’t have a large chunk to pay every month start with a small amount or even the interest and make that your minimum payment until you pay off your debt.
