Does Splitting Your Monthly Payment into Two Save, And If So, How Much?
July 10, 2011 12:13 PM Subscribe
A website I came across
recommended paying half your minimum payment on a credit card every two weeks (instead of one monthly payment) in order to reduce your average daily balance. Does this work, and what kind of savings would this yield?
posted by WCityMike to work & money (11 answers total) 2 users marked this as a favorite
The relevant paragraph:
Divide credit card minimum payments in half and pay that amount twice a month. Interest is calculated based on the average daily balance of your account for the entire month. By making a payment every couple weeks you are reducing that average balance and therefore reducing the finance charges assessed, as opposed to waiting until the end of the month to make a single payment. As an added benefit, splitting your payment into two separate payments helps smooth out the monthly budget as you will not have to come up with an entire payment once during the month, rather half that amount twice during the month (aim for around the time you receive your paycheck).
If you want specific figures to work with, let's say $3,000 at 20%, minimum monthly of $90. These are plucked from the air and not mine, so use better ones if you need to ...