Christian Debt and Finance Resources, Advice

Fix Your Payments to Get Out of Debt Faster

  • Matt Bell
  • 2011 29 Jul
Fix Your Payments to Get Out of Debt Faster

Here’s one of the most important things to know about how credit card debt works.  Let’s say you have a $1,000 balance on your credit card and that you stop going any further into debt.  And let’s say you pay the minimum amount that the credit card company requires each month.

If you do that, your required monthly payment will actually decrease a little bit each month.  This month, it may be $20.  Next month, it might be $19.90, and then $19.80, and on and on.

Isn’t that incredibly kind of your credit card company?  I mean, who else that you owe money to asks for less each month?

Beware The Declining Minimum Payment

Of course, it isn’t kindness at all.  It’s math.  Your monthly payment is based on a percentage of your balance, usually between two and four percent.  If your balance is going down a little each month, then your required payment will go down a little each month, too.

Paying this declining minimum payment each month is what will keep you in debt for approximately… forever!

In this case, trying to pay off $1,000 of credit card debt by taking the declining minimum payment route, it could easily take you over 12 years to pay off that debt, and it could cost you nearly $1,400 in interest.

Charge $1,000 worth of stuff.  Pay $2,400 for it.  Uh, no.  Not a good idea.

Put In The Fix

Here’s a better idea.  Fix your payments.  If you can afford $20 this month, you can afford $20 next month.  Paying this fixed amount will get you out of debt way faster.

If you do fix your payments at $20 per month, you’ll go from a 12-year payoff plan down to a less than 8-year payoff plan.  Just by continuing to pay the amount that you paid last month, you’ll wipe out more than four years of credit card payments.

One of the reasons it’s easy to get in the habit of paying the declining minimum each month is that the monthly payment goes down by such a small amount each month.  It’s easy to miss the fact that it went down.

So, write down this month’s required minimum.  Then, next month, when your credit card company showers you with kindness and asks for a little less, tell them, “Thank you very much for your generous offer, but I’d like to be out of debt before I have grandkids, so I’m sending you what I sent you last month.”

Of course, you don’t need to include a note.  Just send them the money – at very least, the same amount you sent last month.

The Best Debt Payoff Calculators

To compare the payoff time frame and interest payments of making declining minimum payments versus fixed payments, use this calculator.  To see how long it’ll take to get out from under several debts, use the Accelerated Debt Payoff Calculatoron my web site.  It assumes fixed payments and allows you to run what-if scenarios based on making more than the fixed minimum payments each month.

Matt Bell is the author of three personal finance books published by NavPress, including the brand new "Money & Marriage: A Complete Guide for Engaged and Newly Married Couples."  He teaches a wide variety of workshops, including MoneySmart Marriage, at churches, conferences, universities, and other venues throughout the country.  To learn more about his work and subscribe to his blog, go to: