Master Your Card

Here’s something to consider: most of us don’t go into debt over one purchase. It’s usually a combination of many purchases over a period of time coupled with the compounding interest from our credit cards, and voila. We arrive at the current credit crisis our country now faces.

But, we can use that to our advantage instead of having it work against us all the time. By making smaller payments more frequently, we can effectively cut down on some of the interest and make our payments seem more manageable. This is true regardless of the repayment method you chose – be it the traditional method or Ramsey’s debt snowball.

Some benefits of this tactic include the following:

• Align payments with your paycheck. For those living paycheck to paycheck – which most people in debt really are – this allows them to make payments according to when they get paid. You don’t have to pay all of your cards twice a month; just continue with your method of repaying – be it traditional or debt snowball – and work on one card at a time. Having everything spaced out with your paychecks will even out your cash flow every month and make the debt more manageable.

• Pay down your debt more quickly. The principal for these payments is the same as a bi-monthly mortgage. By paying smaller payments twice a month on a 30-year mortgage, you can shave off seven years. Imagine the savings in interest that will have! So, here’s how it works. There are 52 weeks in a year, so if you take on bi-monthly payments that’s 26 half payments which works out to be 13 monthly payments as opposed to just 12. Continue this process until you’ve paid off all of your cards and you’ll save a little more in the process.

• Instant Gratification. For those who need this little piece of the puzzle, you’ll see results quickly with the bi-monthly payments. As far as I’m concerned, this benefit isn’t a high priority to me personally, but I understand that some people need it, which is why Dave Ramsey’s method works. If it works for you, then great. Use it to help get yourself out of debt.

If you feel extra motivated one month, there’s nothing that says you can’t make a third or fourth payment – so long as your credit card company allows it.

And that’s the little caveat with this program! Some credit card companies may limit the number of online payments you can make to your credit card. For example, Chase and Discover allow multiple online payments; however they can only be made once every three days. Citi, on the other hand, only allows four payments per month and that’s it.

You’ll want to make sure you check with your credit card company before you start making additional payments online. Most will allow multiple payments – in fact, I haven’t run across any that don’t – but they will have their own rules and guidelines for going about it.

I encourage someone to give this a try and share what you think. I’ve used this method before when I was in debt. I liked it and definitely saw the results; however, I was sometimes tempted to skip the payment on the first paycheck of the month and make it up on the second – which defeats the purpose. I think once I got into the habit of making the payments though,  it wasn’t such a big deal.

Tell us what you think. Does it sound like something that would be feasible for you?