Reduce Credit Card Debt with Micropayments

pencil erasing the word-debt

Though the holidays are behind us, many Americans are still paying for purchases made with their credit cards. To avoid costly interest charges, cardholders will want to pay off their credit cards as soon as possible, and one way to do that is to make micropayments toward their balances.

While most of us are accustomed to paying our credit card bill once a month, you can actually make as many payments as you want throughout the month. In fact, some credit card issuers and banks will let you make a payment every day. If you currently have a balance, making these micropayments can help you reduce your interest, as most credit card companies will charge you interest based on your average daily balance. If you pay more often, you will reduce your average daily balance, and thus, pay less in interest each month.

Micropayments can also help you stay motivated by giving you immediate gratification and faster results. Instead of going out to lunch or  buying something you do not really need, you can apply that small amount to your credit card debt.

Another way to pay down your balance faster is to divide your monthly payment in half and pay it every two weeks instead of once a month. You will, thus, make 26 payments by the end of the year, which is the equivalent of 13 monthly payments. That extra payment will help you pay off your debt faster.

If you want to make micropayments, you will want to call your card issuer to verify that these payments will count toward your monthly minimum. You will also want to see if your credit card company has any limitations or restrictions on additional payments.

If you are carrying a balance on more than one credit card, pay the minimums on every card, but choose one card to pay off first. You can either choose the card with the highest interest rate, which will save you money, or the one with the lowest balance, which will allow you to pay the card off faster. Stop using whichever card you want to pay off and use another for any transactions.

There are many other advantages to making micropayments:

  • You will save more money the higher your interest rate.
  • You will have more control over your payments. If you get paid weekly or bi-weekly, it is possible that your bank balance will decrease by the end of the month. You can pick a day after you are paid to make your credit card payments. It may be easier for you to make four $50 payments or two $100 payments than a single $200 payment.
  • If you make your payments on payday, you will have money, which is likely to reduce your financial stress and anxiety.
  • Your credit score may go up. If you create an organized payment schedule, you can avoid late payments and pay more than your minimum. Both of these things will help increase your score.

The only disadvantage to making a micropayment is that it takes time, organization and discipline to make the plan work.