For anybody who uses a credit card, interest is the one thing we hate most! Each and every month credit card providers add interest to your account as a charge for borrowing on the credit card they provide. Providers make millions upon millions of dollars each year through adding interest to card holders accounts, without it, they’d simply make no money and go bust.
However for us as the consumers, credit card interest can really hit hard. For some, even making the minimum payments can become difficult at certain times, so growing interest is a major concern. Depending on your credit rating, financial status and even income, you may be able to negotiate with your provider to lower your interest rate, or you could simply apply for a credit card with lower interest and transfer your balance over. However, there’s a quicker and easier way to reduce your interest charges each month in one simple step.
By making ‘two half payments’ instead of one whole payment per month you can reduce the interest you are charged. How does that work? This is because interest is normally charged daily and then added to your account in one lump at the end of the month. So interest on your balance is charged for 30 days each month. So, instead of being charged 30 days worth of interest on a full balance, by making two half payments you will be charged 15 days interest on your whole balance, then the remaining 15 days interest charged at the new lower balance. This means your balance will decrease every 15 days and so will your interest charge. See it now?
let’s have an example..
A single payment: I have a $5000 balance on a card with 25% APR. If I make 1 payment of $150 per month, by the end of the year my balance will be at $4380 and I will have been charged $1180.25 in interest.
By making 2 half payments: I have a $5000 balance on a card with 25% APR. If I make 2 payments of $75 per month (every two weeks), by the end of the year my balance will be at $4376 and I will have been charged $1176.64 in interest.
Or even split in to 3 payments: I have a $5000 balance on a card with 25% APR. If I make 3 payments of $50 each month, by the end of the year my balance will be at $4369 and I will have been charged $1169.03 in interest.
See how you can save by breaking your payments up throughout the month to reduce your interest bill? Remember to use this technique on all your cards to save even more. Online banking is a good way to set these payments up. You can find more information on credit cards and the types of credit cards available for you here.