Pay More than the Minimum Credit Card Payment

Consider this my regular reminder that it's a bad idea to only make minimum payments on your credit card debt. Here's what Bankrate advises:

Don't use the minimum payment as a guideline for what to pay your creditors each month. Those are set up to string out payments (and interest charges) for as long as possible. "Even paying an extra $10 or $20 per month could save you thousands on interest over the course of time, depending on how much you owe," says McClary.  Check out what extra payments can do to speed up your payoff.

The minimum payment covers interest and a tiny portion of the balance. Every time you make a payment, try to pay off the purchases you made during the billing cycle, plus interest and a portion of the balance. This will help to chip away at your balance a lot faster.

I've said before that paying the minimum on your credit card will cost you a boatload. So instead of paying a bit off, get serious and tackle that debt head on. Consider some of the ways you have to make extra money, then put it all toward getting out of credit card debt. Then make a plan not to get back into debt.

I know, pretty simple to say, harder to do. But the only way you're going to get out from under it is through discipline and sacrifice. Sorry, there's just not an easy way to escape.

The good news is that once you do get out, you'll probably never get into debt again. Why? Because getting out of it was so painful. ;-)

For more thoughts on getting out of debt, see these posts:

• Strategies for Dealing with Credit Card Debt

• Credit Card Hazards and How to Avoid Them

• Debt Payoff Smackdown: Pay Highest Rates First Versus Pay Lowest Balances First

Comments

[Travis Williams]

I was in debt with a few credit cards about 4 years ago and I made a decision to face it head on. My fast track way to get out was simple.

I had two credit cards that I had thousands charged on.

On the card that had the lower balance, I would pay the minimum payment plus the amount of interest due. This way the entire amount of the minimum was going toward the balance while I also paid the interest due, instead of a majority of the minimum going towards interest only.

On the card with the higher balance I would double the minimum and then add the interest due.

This may not work for everyone but it worked for me rather quickly.

I am now married with my first child on the way and the only debt we have is our mortgage and we are very careful to keep it that way.

[Jake]

The "credit cards and consumer debt" message board on www.fool.com is by far the best resource I've ever seen to help people get out of extensive credit card debt. There are tons of people there that will give great advice for free, and many of them (including two who I know personally) have already gotten themselves out of 6-figure credit card debt. Nobody better to learn from IMO.

[Susan]

My rule of thumb is and has been for the last 8 years since I began using credit cards again is to pay the minimum plus the finance charge each month. It gives me the sense that I'm chipping away at the principal separately, yet by also paying the finance charge in full each month, I am also paying penance for my poor financing skills. I think I'm finally "getting it" and hopefully, I will be clear at the end of 2009.

One more thing, spending cash has REALLY gotten my attention this last year about what matters to me and it bowls me over that I have learned to completely re-prioritize EVERYTHING. Interesting thing, this money stuff!