credit cards

Pay credit card bill early and save

Try micropayments

If you can't afford to fork over a big chunk of change toward your debt all at once, consider micropayments. Corbett made online payments of $5 each day for an entire month just to see if the credit card company would accept the payments and apply it to the principal. It did.

While Corbett doesn't recommend repeating his approach, he does urge cardholders to set up an online payment program through a bank account. That way, cardholders can make micropayments when they get a bit of extra cash.

Another technique cardholders can use is to divide their monthly payment in half and send half of it early.

A few extra steps can help cardholders get the most out of the "pay early" approach.

Cardholders who make an early payment and want the card company to apply the money toward principal right away are urged to write "apply to principal" on the check or to make a note on their online transaction. Otherwise, the company could hold the money as prepayment of next month's bill.

“If you're not getting away from credit card use altogether none of these strategies will help.”

Cardholders also should closely track when they've made a payment and the amount paid, says Sandra Shore, a counseling training manager with Novadebt, a nonprofit consumer credit counseling agency based in Freehold, N.J.

"If you make two payments in one cycle, it can become confusing ... and you could end up missing a payment the following month and get slapped with late fees and even more interest charges," Shore says.  

Remember, whatever you pay in one cycle goes toward that one cycle's debt. You can't pay ahead to next month's minimum payment.

While it is nice to pay early in the cycle, it's foolish to jeopardize the ability to pay next month's bill.

"Keep in check your excitement of paying things down and make sure you have enough to take care of minimum amounts for all your credit cards," says Ken Clark, a Certified Financial Planner and author of "The Complete Idiot's Guide to Getting Out of Debt."

Paying credit cards early can help reduce a cardholder's debt burden in the short run. But it isn't the final word in debt reduction strategies, says Greg Ward, a Certified Financial Planner with Financial Finesse, a Manhattan Beach, Calif.-based provider of financial education for organizations, employees and customers.

"Paying early should be part of many things you do to pay down your debt," Ward says. "Just one strategy is not enough."

The ultimate goal, Ward says, is to get rid of your credit cards.

"If you're not getting away from credit card use altogether none of these strategies will help," he says.

"You'll forever be on the hamster wheel."

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