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Your Money

Understanding Credit & Debt

Smart Ways to Manage Your Borrowing

Adjusting Your Payments Can Make a Big Difference

One of the first steps to financial fitness is knowing where you stand in terms of credit and debt. People borrow money for a variety of needs, and the ways they manage debt can be just as varied. Here are a few smart and simple ideas.

Depending on your financial situation, life needs and personal preferences, some will work better for you than others. Give them all a quick read, see what feels right for you, and put those ideas into action today.

  1. Pay more than the monthly minimum. This is the simplest and most obvious strategy. Sending as little as $10 more in your payments will pay your credit card off faster and save you interest.
  2. Make a half payment every 2 weeks. Instead of paying once a month, slice your payment down the middle and send half every two weeks. Why? A year has 52 weeks, so you'll make 26 half-payments instead of 12 full payments. You'll end up making an extra full payment every year.
  3. Choose one debt above all others, and go all out to pay it off. There are two approaches to this strategy:
    • Identify the debt with the highest interest rate, and send more of your money to pay off that bill. This reduces the biggest chunk of money you're spending on interest.
    • Pay off one or more of your smaller debts first, since you may be able to wipe them out completely.
  4. Use some of your savings to pay your credit card debt. If you owe more in interest on your credit card(s) than what you are earning in interest in your savings account, you may want to put some of your savings to better use by paying down your credit card and reducing high-interest debt. While it's important to build up your savings account for many reasons (such as having a stash to help prevent overdrafts or to pay for sudden emergencies) there are times when that money may be more useful by paying off debt.

If you haven't created a budget yet, do it now.

Do you know where your money goes every month? Recording your daily transactions is a great habit. For simple tips to track your spending, use our Your Path to Savings (PDF) worksheet. Knowing the basics about your cash flow is the first step to uncovering new ways to save.

With a little planning and managing, you can reduce the stress of borrowing and maintain your financial health.

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