Want to reduce the amount of interest you are sending to credit cards each month?  Who doesn’t?  Even if you are only paying the minimum payment, making the payment earlier in the month rather than waiting for the due date can make a noticeable difference in the amount of interest you pay.

A recent article from Red Tape Chronicles breaks down the numbers assuming a $1,000 debt payment made at different times during the month:

“A full month’s interest on $3,000 at 29 percent is $74. Make the payment two weeks early and you’ll only owe $33.37.

So by simply moving up your due date a couple weeks you chop your interest payment in half (in this example). Credit card interest accumulates based on what is known as the average daily balance.  Think of it as the average balance on your account over the entire month. 

At the end of each day your balance is recorded and the sum of all those balances is divided by the number of days in the billing cycle (typically around 30).  This figure is then multiplied by your daily periodic rate to get the monthly amount of interest you owe.

By paying your payment half way through the billing cycle you are effectively reducing the amount owed on your credit card balance, and driving down this average daily balance figure.

Photo courtesy of atp_tyreseus

For those living paycheck to paycheck, or struggling with some other aspect of their finances, a “spending fast” could help break the addictive behaviors costing you money.

The majority of workers are paid biweekly, and spend the weekend between paychecks digging for loose change to make ends meet. We were no exception. Back when I earned very little money, and my wife and I had our first child, we used credit cards to float until the next pay weekend.

This behavior inevitably led to the accumulation of credit card debt which took some time to work off. The answer to our problem, which unfortunately was not obvious to us at the time, was that we were continuing to spend money we didn’t have. And when we did manage to save a little from each paycheck for the next weekend, it was all gone by Saturday afternoon.

We needed to do something radical to break from this cycle.  We started declaring “no-spend” weekends, and putting ourselves on a spending diet from Friday night to Monday morning. The trick to this was to initiate the fast when we had money, beginning on payday. This forced us to learn to delay purchasing things we really wanted, and prepare by only buying things we really needed.

After trying this for a couple pay cycles we discovered that it was a nice feeling to still have cash a week after payday and not have to rely on credit cards. We also found that our unplanned spending decreased as we became more discriminating in our purchases.

Calculating our savings on Sunday evening was the best part!  At the end of our spending fast we reflected on all the things we used to do that took money. Eating out, going to movies, and shopping out of boredom really add up! We started looking for more frugal ways to spend our weekends and discovered that the greatest things in life really are free.

Along with the end of these frugal weekend purchases we also saw a drop in our credit card balances. If you find yourselves currently stuck in the paycheck-to-paycheck routine I highly recommend going on a diet - a spending diet. Use this 48-hour weekend spending fast to get you started.