by Bill Hardekopf, CEO of LowCards.com
Holiday shopping is just around the corner, and consumers need to have their
credit card balances as low as possible in order to avoid costly interest
charges. One way to do this is to make micropayments on their credit card
While we are conditioned to pay our credit card bill once a month,
consumers can actually make a number of smaller payments throughout the month. Some banks and issuers allow payments to be made as often as once a day. If you
carry a balance, micropayments can reduce the interest because most credit card
companies charge interest based on your average daily balance during the month.
Pay more often and you reduce your average daily balance and therefore the
interest you pay that month.
Micropayments provide faster results and
some immediate gratification that can keep you motivated. Rather than eating
out or splurging on something that you don't really need, immediately apply
that money to pay down your credit card balance. Instead of paying a certain
amount once a month, divide that payment in half and pay that amount every two
weeks. Consumers can even sign up for an electronic transfer of your funds to
take place 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
If you are planning to make micropayments, consumers may
want to call their credit card company to verify that separate payments can be
made and will be credited to their monthly minimum. See if your issuer has any
restrictions or limitations on making additional payments.
If you have
more than one card with a balance, keep paying the minimums for each card, but
pick one card to pay 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.
several other advantages to making micropayments when paying down credit card
- You may have better control of your payments. If you are paid weekly or
bi-weekly, money can slip away by the end of the month. 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.
- 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 will likely reduce anxiety and
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.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies 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