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Toast the rewards when you top-up card payments by the price of a few pints

We all tell ourselves that we’ll pay off more of our loans or credit card debts when our financial situation changes. (Oh yes, we will.) But actually, for as little as the price of a few Friday pints, making small monthly sacrifices now could bring big rewards later.

Paying more saves you money

Sounds like a contradiction, doesn’t it? But it really is true that increasing how much you pay off each month will save you money on interest. Picking to pay the minimum you’re allowed to might feel affordable in the short-term, but long-term it can leave debt hanging around on your credit card.

It’s only once interest and fees are covered that your monthly payments start chipping away at the amount you originally borrowed (the bit you’ve spent on your card). If you’ve built up a big card balance and are only paying back a small amount each month, it’ll take you longer than you probably realise to pay it off. To make a decent dent in your balance and pay less interest, top-up what you’re paying by a few extra pounds, as often as you can. It’ll help you avoid getting into persistent debt too.

Jacob* did it when he graduated from uni and got his first job. Minimum payments seemed the most affordable option for him up until then. His part-time bar work had helped keep his bills paid. But he was curious now to see what he could do to clear the £600 balance on his card, with more disposable cash to play with. He punched some numbers into our repayment calculator.

Jacob realised that by switching from minimum payments (£21 last month) to a fixed £33 a month from now on, he could pay off his £600 card balance within a few years. He’d save £1,027 on interest charges too. That’s £1,027 extra towards a move out of his parents’ house and into his own rented pad in Manchester. (All for a few less pints on a Friday.)

It could also save you time

Adding a little more to your payments each month could cut years off your debt repayment time.

Shari* set up a Direct Debit for her minimum payment when she opened her account. It’s looking like it’ll take her 14 years, 5 months to pay off her £500 balance if she sticks with this payment routine.

Yet, if she could switch from those minimum payments (last month it was £18) to a fixed £39 a month from now on, she’d not only pay £883 less interest, she’d clear her credit card in just 1 year, 4 months – slashing a huge 13 years, 1 month off her repayment time. She’d have to rethink her spending to afford the extra, but it’s something Shari feels is achievable now she’s seen the big potential impact.

Faster, bigger repayments could even improve your credit score

Dana* checked her credit score for free before applying for another card she liked the look of. It was lower than she expected. She was confused because she always made her payments on time and had never been charged a late fee. What was going on?

Dana hadn’t realised before using CreditWise that being near the limit on several of her cards was affecting her score. It’s because of something called the ‘utilisation ratio’. Sounds complicated, but it’s simply a comparison of the total amount of credit being used to the total credit available to the borrower.

A high percentage shows you’re using a lot of your credit card limit, while a low percentage shows you’re not. By spending a lot of time close to the credit limit on several different accounts it could look to lenders like Dana depended on borrowing to get by. And that was harming her credit score.

It can open doors to new offers too

Dana’s just set up a Direct Debit for £35 a month. She’d been paying the minimum for a while (£28 last month) but was frustrated with how little progress she was making on paying off her card. She just didn’t seem to be making a very big dent in her £800 balance.

That boost to her monthly amount will set her up to pay back what she’s borrowed a massive 15 years, 4 month sooner. She’ll save £1,325 in interest too by the time she’s cleared her card – that’s roughly the equivalent of three months of nursery fees for her young daughter.

Not only that but paying off a bigger chunk of her balance means Dana could find she starts to qualify for new credit products and offers, like an increase to the credit limit on her card.

Paying off pays off

There’s no need to wait for a windfall. Paying a little more each month shows that you’re in control of your finances and manage what you’re borrowing well. And as your balance clears more quickly, you can reap the rewards and feel cool, calm and collected when it comes to credit.

*Jacob, Shari and Dana aren’t real people, but their situations are based on real payment patterns of customers in persistent debt. To arrive at the numbers (payment amounts, interest savings and repayment times), we made some assumptions:

  • Jacob’s card balance is £600. He switched from making his minimum payment each month (1% of balance, plus interest and fees incurred that month) to paying £33 each month.
  • Shari’s card balance is £500. She switched from her minimum payment Direct Debit (1% of balance, plus interest and fees incurred that month) to a £39 fixed monthly Direct Debit.
  • Dana’s card balance is £800. She switched from making her minimum payment each month (1% of balance, plus interest and fees incurred that month) to paying £35 each month.
  • All have a Capital One Classic Card with an interest rate of 30.34% per year on all transactions and balance transfers. We’ve assumed that they don’t spend on their card or make balance transfers, they don't incur fees and their T&Cs stay the same.
  • We worked out how much less interest they’d each pay to clear their card balances and how much faster they’d repay their balances too by comparing the total cost of interest and the repayment periods before and after the changes made to their payments. We’ve also rounded savings to the nearest Pound Sterling.