Pay Off Credit Card Debt With Micropayments

Credit card debt can be overwhelming. Once you start to carry a significant balance from one month to the next, the high interest rate levied on that balance can make it feel like you’re fighting an uphill battle that you are destined to lose.

One of the tools you can use to start digging out of credit card debt is to make micropayments throughout the month.

What Are Micropayments?

Many people think they can only make a credit card payment when they receive their bill in the mail or inbox at a certain time of the month. That is not the case with most issuers.

Micropayments are smaller payments you make to the credit card company throughout the month. Most major issuers allow you to make payments as often as you’d like; in some cases, you can even make one payment each day.

Advantages of Micropayments

Micropayments will help lower your interest payments. Many credit card companies calculate your interest based on your average daily balance throughout the month. If you are making smaller payments during the month, you will slightly lower your average balance. The higher the interest rate on your card, the more you will save.

Micropayments can help you pay off your debt faster. From a financial standpoint, one of the worst things you can do is to carry a credit card balance from one month to the next. The exorbitant interest rates that most companies charge will make this an extremely costly practice. You need to pay off that balance as soon as possible. Directing any extra money you have during the month toward paying down that balance is very beneficial.

Micropayments may help raise your credit score. By making more smaller payments throughout the month, you will be avoiding late payments and using slightly less of your available credit, both of which are important factors in increasing your credit score. This would be especially helpful if you are trying to raise your credit score or have a limited credit history.

Finally, micropayments may have a beneficial effect of reducing your financial stress. Instead of looking at an overwhelming financial mountain, you may feel a small victory in seeing that debt amount start to decrease. That may lead you to make even more smaller payments.

How Micropayments Work

Here are two examples of how this can work.

Say a couple was thinking about going out to eat pizza and take in a movie one night. Instead of spending that $50, what if they ate at home and rented a movie? They might save $30. If they took that money and immediately made an online $30 payment to their credit card balance, their debt would forever be lowered by $30. If they made a habit of doing this every time they made a conscious effort to save money, they’d be surprised the dent they could make in their credit card debt.

Another example is the person who has decided to tackle the credit card debt by making a $200 payment every month. That would knock off $2,400 per year. If the person instead decided to pay $50 every week, that would pay off $2,600 per year since there are 52 weeks in a year.

If you feel micropayments can help you pay down your debt, check with your credit card company to make sure micropayments are allowed. Some issuers may limit the number of payments you can make each month.

It does take financial discipline to make these micropayments. It’s critical that the sum of your micropayments made throughout the month at least equal the amount of the minimum payment due, or else you could be assessed a fee.