Fall into the minimum payments trap
Making the minimum payment on your debt can seem like a convenient solution to debt management. Payments are getting made and you may even have a little extra breathing room in your budget.
But paying just the minimum won't get you out of debt as fast as other repayment options.
Many consumers see minimum payments as a helpful tool in figuring out how much they have to pay, says Rick Larrick, the Michael W. Krzyzewski professor of management at Duke University. But, he says if people look at how long it will take to pay off the balance using just the minimum, they will realize that paying the minimum is a lousy way to get out of debt.
Bankrate has a credit card calculator that can help consumers compare the difference between making the minimum payment and paying a fixed amount each month.
"The minimum is not in (people's) interest, frankly," Larrick says. "The minimum is used by credit card companies to make sure you're alive and have some money, but not so that you get out of debt."
Instead, try to pay off as much as possible each month, even if it's considerably more than what the minimum requires.
Larrick says a sweet spot in debt management is paying off three times the amount of interest you owe, as well as paying off any new charges you may have added.