Here’s Why You Should Always Pay More Than The Minimum Monthly Payment On Your Debt
When you’re saddled with a large amount of high-interest debt, like credit card bills, paying it back can feel like it’ll take forever. Of course, the best debt payoff strategy is to clear the balance in full every month, but sometimes, that’s just not realistic.
A 2018 study from CompareCards found that one in five people with credit cards didn’t pay their credit card bills in full in the previous six months. In fact, 26 percent of female cardholders responded that they weren’t confident in their ability to pay off their credit card bills in full during the month that the study was conducted.
We know racking up credit card debt is easy, especially when you’re on the go 24/7 — attending networking events, building your work wardrobe, being a bridesmaid in your friend’s wedding and all the other things you’re doing to thrive in your career and life. What’s not easy is figuring out how to pay it back before all of that interest takes a toll on your budget. If you can relate, listen up.
Just pay more than the required, minimum monthly payment.
The simplest way to start paying down your high-interest debt is to just pay more than the minimum monthly payment.
Let’s calculate it. If you have a credit card balance of $1,000 and an interest rate of 17 percent, it would take you 37 months to pay off that debt if you only pay the minimum payment of $35 every month. That’s more than three years!
By paying just $10 more per month, you could reduce that repayment time to 27 months, or two years and three months. By paying double what the minimum payment is per month, you’d reduce the repayment time to 17 months, or one year and five months.
Doesn’t that sound so much better paying off $1,000 over three years? Yeah, we thought so.
You’ll end up saving money, too.
Not only will paying more than the minimum monthly payment reduce the repayment time, but it’ll also help prevent you from paying a lot of money in interest.
If you paid the minimum monthly payment of $35 on that $1,000 balance, you’d end up paying $294 in interest. That’s almost 30 percent of the starting balance. So over the course of those 37 months, you’d end up actually paying $1,294, instead of just the starting balance of $1,000.
By paying just $10 more per month, you’d pay $211 in interest. Paying double the minimum required payment would only charge you $126 in interest. Whatever the amount, you’ll end up saving a lot of money by paying more than the minimum.
Basically, it’s a no-brainer.
By always paying more than the minimum monthly payment, you not only reduce the repayment time on your debt, but you save a ton of money, too. Regardless of whether it’s credit card debt, student loans or a mortgage, always paying more than the required minimum monthly payment is the best debt payoff strategy if you can’t pay off the balance in full. Keep working hard to pay down those balances and you’ll be debt free in no time.