Timing Tricks for the Best Way to Pay Down Debt

by Chris Brantley
The timing of your debt payments can save you money.

Paying down debt quickly can save you money. If you time your payments properly, you can lessen interest charges and take years off the length of a credit card or mortgage. These key timing strategies include paying early in the billing cycle, making multiple payments throughout the month, paying the worst debts first and concentrating on paying off one debt at a time.

Pay Before Due

Credit cards charge interest daily. If you wait until the end of the billing cycle and pay on the due date, you accrue more interest than if you pay early in your billing cycle. If you don't pay off your balance each month, your credit card company charges you interest on your balance each day. On the second day of the cycle, the interest accrues on the balance and the accrued interest from the first day. So if you make your payment on day 25 of your cycle, you end up paying interest on your balance and the interest that has built up for the past 24 days. According to Bankrate.com, you can save about $5 a month by paying the minimum payment for a $10,000 credit card balance with an 18 percent interest rate on the second day of the billing cycle instead of the last. That may not sound like a lot, but over the life of your credit card, $60 a year can make a difference. Of course, the higher the interest rate, the more you save.

Pay Every Two Weeks

You can also pay your credit cards and your mortgage off faster and save money with biweekly payments. Instead of making a monthly payment, you split the payment and make it every two weeks. Since one of the payments is earlier in the billing cycle for your credit card, it saves you money on interest charges. Also, since there are 52 weeks in a year, you end up paying an additional mortgage payment each year. In other words, you make 26 payments a year or 13 full payments per year instead of 12. This strategy allows you to pay off a 30-year mortgage around seven years earlier than 12 payments a year.

Pay the Worst First

Paying down your highest-interest debt first enables you to diminish the whole of your debt faster. With this method, known as debt stacking, you eliminate your most costly debt and then move on to the next most expensive debt. Here's how it works. You make all your monthly minimum payments and then pay an additional amount toward the debt with the highest interest rate. Once that debt is paid, you pay on the one with the next highest interest rate.

Prioritize Your Payments

If you, for example, have a credit card with a $5,000 balance and a 20 percent interest rate, a car loan with a $10,000 balance and a 10 percent interest rate, a student loan with a $15,000 balance and a 6 percent rate, and a mortgage of $150,000 with a 5 percent rate, you would make all your monthly payments and add $100 to your credit card payment. After you pay it off, you add the minimum payment on that card and the extra $100, and apply it toward the car loan until it is paid in full. Then you pay the minimum credit card payment, the extra $100 and the former car payment toward the student loan. Eventually all the payment amounts and the extra $100 go toward your house until you pay it off in full.

About the Author

Chris Brantley began writing professionally for a financial analysis firm in 1997. From 2000 to 2004, he worked as a financial advisor, specializing in retirement planning and earned his Series 7, Series 66 and insurance licenses. Brantley started his full-time writing career in 2012 and has written for a variety of financial websites, including insurance, real estate, loan and investment sites. He holds a Bachelor of Arts in English from the University of Georgia.

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