Make Bi-weekly Payments to Help Reduce Your Balance
If you are trying to pay off a credit card, here is a method that you can adopt which will pay the balance off much quicker while avoiding excessive interest charges.
High Interest, Long Term. If you have a balance of $5,000.00 on a credit card with 17% interest and a 3% minimum payment, you will incur interest charges of $4,119.00 and a 14 year term of paying off that card! That is if you only pay the minimum amount due every month.
Increase Your Payments. Now add this into the mix: make a half payment every 14 days and you will eliminate the balance in three years and 18 weeks and only pay $2,521.00 in interest. How does saving over half in interest and paying off much sooner sound?
The requirement here is that you begin by making sure that your regular monthly payment is paid by the due date. If you fall short of this, then you will still end up with late fees, high interest rates and a spotted credit record. So, if you begin this process, stick to the rules and make it work.
The reason that this works is because credit card companies are required by law to credit each payment that they receive when they receive them. What you are doing, then, is paying extra towards the principle on the balance. But, adding to that is the fact that since you are making an extra payment every two weeks, you will end up with 26 payments per year which is equal to 13 monthly payments, not 12. A complete extra month’s payment is applied to your balance. Now, that is smart thinking.
