If you believe even a small savings is worthwhile, then paying your credit card bills sooner is a money saving tactic you’ll love.

You pay the same amount, but the timing creates a few dollars of savings each month.

When you carry a balance on your credit cards you have no grace period, so you are charged interest every day until the bill is paid in full. Not only that, you’re charged interest on your average daily balance, which includes the interest added each day.

Considering that you probably are earning zero interest on money in your checking account and could be paying up to 29.9% on your credit card balance, it makes sense to make that payment just as soon as possible.

The more you owe on that revolving balance and the higher the interest rate you’re paying, the more you will save by shaving a few day’s interest off each month. If you make your payment on the day after your statement comes out you reduce your average daily balance for the current month by the amount of your payment.

Thus, if your payment includes a principal payment of $100, your average daily balance for next month will be $100 less if you pay it on the first day of the billing cycle than if you paid it on the last day.

At an interest rate of 18%, you’d save $1.50 by making that payment early. Not a lot, but when you’re trying to get out of debt, every small savings does add up.

You can also save on interest by making small payments in addition to your monthly payment. Even an extra $5 to $10 paid each week can make a big difference in the interest you pay over a year’s time. These small payments are easy to make if you’ve set up online bill pay for each of your credit card accounts.

Of course, if you have a sudden windfall such as a bonus check, putting a chunk of it down on your credit card bill the day it arrives can make a big difference in the interest you’ll pay.

Do remember that you need to wait until the statement is generated to make “regular” payments. A payment made the day before the billing cycle begins will apply to your principal balance, but if you don’t make a payment during the next billing cycle, you’ll still be considered past due.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

This entry was posted on Wednesday, September 16th, 2009 at 12:45 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.