Pay off card charges before bill arrives
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
I charged about $100 to my credit card last month. However,
it did not pick up in the latest billing cycle. I have saved enough to pay that
$100, plus the minimum balance, right now -- even though those purchases are
not showing up in this billing cycle yet.
Does it save me more money to pay that $100 along with the
minimum payment now -- even though those purchases are not showing up on the
billing statement yet? Or should I just
pay the minimum balance and hang on to the $100 for when those purchases show
up on the billing statement?
FYI: The new balance is $9,537; minimum payment is $187; interest
charged is $92.
If I try and hang on to that $100, I'll be tempted to use it
to cover the cost of getting the oil changed on the car ... and other things.
Which is the best route to go and why? -- Sandra
You are absolutely right to pay the entire $100 you charged
last month as soon as you can. Some people might think that with a balance of
$9,537, another $100 or so won't make a difference. However, paying current
charges every month not only saves you interest, but it makes the difference
between going further into debt. Paying that $100 helps you set a precedent
that you don't buy things using a credit card unless you have the money in
When you are carrying a credit card balance and are being
charged interest, every day counts. There's no need to wait until the charges
show up on the statement to make a payment.
Now, about that balance. You are on the right track planning
how to best use $100. The missing piece of your plan seems to be a good budget --
one that includes oil changes, and all the other expected and unexpected items
that you pay on a regular or semi-regular basis. A budget should also help you
plan for short-term and long-term goals, such as paying off credit card debt.
As you make your budget, you can use a credit card payoff calculator,
to see how much you need to make in extra payments every month until that
credit card balance -- and any other debt -- is gone.
If you don't see any room in your budget for making extra
payments, consider increasing your income at least temporarily. You might be
able to sell something you already have, or buy and sell items online. Perhaps
you can get extra hours at work, or work a weekend here and there.
Right now, you're paying so much in interest that not very
much of your payment goes toward the principal. If you could add an extra $100
per month, however, you'd start to see progress.
If you're not sure how to set up a budget, or if paying off
your debt seems like an impossible task, I recommend finding a nonprofit agency
affiliated with the National Foundation for Credit Counseling
or the Association of Independent Consumer Credit
See related: Extreme ways to tackle debt
Published: August 9, 2013