Pay off card charges before bill arrives

To Her Credit columnist Sally Herigstad
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, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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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


Dear 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 hand.

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 Counseling Agencies.

See related: Extreme ways to tackle debt

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Updated: 01-16-2019