Savings plays major role in paying off your debts. Though initially savings look smaller and not enough but on long run it really works. I got a chance to meet a family; they got out of their debt amazingly. I am mentioning here in brief what they told me in brief about their success.

They were having $14,000 consumer debt; almost half of the money they owed was a result of credit card obligations. They made a plan and determined to be debt-free. They made a plan of savings and paying off their bills early. So they used a simple but working technique “save more” and they threw extra money at their debt to pay it down faster. They started to make payments before the billing due date.

When they paid their bills sooner the interest that accrues got lower. After eleven months there were completely debt free and now they are having their own savings.

Summary of the whole story is that making payments early will save you immense money.

Making payments before the due date

Credit cardholders do not have a grace period if they carry a balance from month to month. Everyday of the month, the credit card company charges interest until the bill is paid. The cardholder will loose little money when the monthly payment will be made at the statement due date.

Early payment compounds the interest, for example when you make payment on the second of the billing cycle; you pay interest not only on the outstanding balance but also on the interest that is charged on the first day.

In simple, every early payment saves you some money. This simple strategy really works because you can save money as long as your credit card interest rate is greater than that of your bank account .

For example if a card holder is having 18% annual percentage on a $10,000 balance and a minimum payment of 3.5% ($350) of the balance. Now when the cardholder will pays on the last day of the billing cycle, finance charges for the period will total $152 on an average daily balance of $9,989.

And when the cardholder will pay on the day 2 of the billing cycle before the bill came in the mail then the average daily balance falls to $9,661.

That means you will get a saving of $5 per month. So it means yearly saving will be $60.

Paying early is having other potential advantages also such as it will prevent late charges.

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