Staying out of debt can be a great way to establish financial security and independence. However, there are times in which using debt can be an effective way to maintain or improve your lifestyle. If you are in debt, making micropayments can make it easier to keep your balances to a manageable level as well as minimize interest payments.
The Benefits of Micropayments
There are several benefits of micropayments such as the ability to break large balances into manageable chunks. For example, instead of paying your $500 car note at once, you could opt to pay $125 every paycheck. This ensures that you have money left over to pay for gas, groceries or other needs. In addition, some lenders charge interest on a daily basis, meaning that it’s always a good idea to reduce your balance owed whenever possible. Obviously, the cheaper option is more convenient for every individual not just those in certain scenarios.
Why You Should Consider Micropayments to Pay Off Debt
Making micropayments can make it less tempting to spend the $20 in your wallet or the few extra dollars in your bank account each month. Instead of making an impulse purchase, you can pay down your high interest credit card debt or otherwise ensure that you’re staying current on your balances. Micropayments can also be ideal because lenders may refrain from making phone calls or taking other actions if you pay at least some of your balance each month. This buys you time until you have an opportunity to make the minimum monthly payment.
What to Look for When Making a Micropayment
Although micropayments can be an ideal way to pay off debt faster, there can be some pitfalls to consider. For instance, a lender may charge a service fee when you make payments by credit or debit card. Therefore, you may have to rely on ACH transfers or other methods that don’t charge such fees.
Even if you’re charged 1% on a $10 weekly transaction, you’re still paying $1 in fees that don’t go toward your balance. In some cases, you may be able to avoid fees by paying $20 or $50 instead of $5 or $10. Alternatively, you may be able to avoid fees by only making two or three transactions instead of five, six or seven every 30 days.
Don’t Forget to Stop Spending
Regardless of how you choose to pay your debt, you won’t make any progress if you don’t stop incurring new debt. Therefore, you should make a plan to cut back on your nights out or get rid of subscriptions that you don’t use or don’t need. It may also be a good idea to get more hours at work, negotiate a lower interest rate on your debts or otherwise take steps to get a handle on what you owe.
Micropayments can be a powerful way to help you manage your debt and keep up with your monthly payments. Online calculators and other tools may be able to help you calculate what you need to pay, when you need to pay and how much you save compared to making a single payment each month.
