Almost every credit card has a minimum amount that you can pay off monthly. If you’ve been a bit hasty with your use of credit in a given month, why not just take care of the minimum payment that your provider allows you to make… right?
Hold on a second. This practice, while often perceived to be simple and convenient, is certainly not advisable when it comes to addressing existing debt in a timely and safe manner.
This situation is one where interest will begin to bite into your overall financial health in relatively short order.Â It may not feel like you’re saving money when you increase your credit card payments, but you are. Depending on your interest rate, you’re saving an average of 10-29% per year in interest on any balance that you manage to get off your cards sooner than later. If left unchecked, the amount of interest accruing on these payments can equal or even surpass the original outstanding balance that you were working to pay off!
Conversely, the little bit of extra breathing room you might be able to give yourself one month will accelerate and compound into greater benefits for your financial stability over time. Taking the time to plan a way to set your personal finance solution in motion will pay off quickly in terms of the increased freedom you will have to tackle further outstanding debts, build investments or work toward other goals.