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Author: jennapeach One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308881  
Subject: Question about biweekly payments Date: 9/17/2001 4:03 PM
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I've seen references to paying CC's twice a month. How does this work? Do you pay the entire minimum or desired payment and then tack on another payment on top, or do you just split up your desired payment and send half early and half on time? Does this, in fact, lower your principal quicker?

Thanks,
Jenn
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Author: dianakalt Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91287 of 308881
Subject: Re: Question about biweekly payments Date: 9/17/2001 4:30 PM
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I've seen references to paying CC's twice a month. How does this work? Do you pay the entire minimum or desired payment and then tack on another payment on top, or do you just split up your desired payment and send half early and half on time? Does this, in fact, lower your principal quicker?

Thanks,
Jenn


Hi Jenn,

As long as you make sure that you are paying the minimum payment, you can sent multiple payments per month however you'd like. If you plan to send multiple payments, each of which will be SMALLER than the minimum but they will in TOTAL be GREATER than the minimum, I think it might be wise to check and make sure the CCC will accept 2 payments each less than the min, but equalling >= the minimum without charging a late fee. (I've heard of people having problems with lenders not taking partial payments before, but generally this is in reference to a car or house payment. I doubt it would be a problem with CCs but better safe than sorry).

I personally pay $$$ to my credit cards whenever I damn well feel like it. For a long time, I got paid biweekly, so I managed my finances based on bi-weekly timeframe as much as possible. I put money aside for x-mas, vacations, car insurance biweekly and paid extra on debts bi-weekly. Now I am getting paid weekly. I am still sorting out all the kinks with that, because a) I've only been getting paid weekly for a short time and b) i was out of work for several months before my current job, so I'm trying to re-evaluate my financial picture as a whole. I think the way it will shake out is that I'll probably pay down loans and such about twice a month. I'll pay stuff like utilities and rent once a month as normal. I'll put aside my x-mas and insurance and such money every week.

You CAN save some money by paying more frequently than once per month on your credit card bills. CC interest is compounded daily, so if you make extra payments in the middle of the month, your average daily balance for that month will be less and thus your interest will be less. In most cases, it doesn't make a HUGE amount of difference, but if you have a few extra dollars in your checking account that you might otherwise spend recklessly, why not send it to pay down your CC debt?

d

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Author: JnJfools Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91289 of 308881
Subject: Re: Question about biweekly payments Date: 9/17/2001 4:58 PM
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I've seen references to paying CC's twice a month. How does this work? Do you pay the entire minimum or desired payment and then tack on another payment on top, or do you just split up your desired payment and send half early and half on time? Does this, in fact, lower your principal quicker?

Jenn,

Most credit cards only require the interest as the minimum payment per month. This means that if one only pays what the credit card company requires, they never pay anything towards the principal.

When a credit card company credits an account, they apply the payment against the recent debit (interest). So, any other credit towards the account would be applied against the principal during the billing period.

The bi-weekly payment system is not set up to pay off the monthly debit. It is to ensure that there is less principal to pay interest on during the next month.

If one were to pursue it as a good way to pay off the minimum amount due in two payments, they essentially would be paying interest on the amount due if the credit card accrues interest daily. That is not a Foolish thing to do.

JnJfools

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Author: 2195501y Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91296 of 308881
Subject: Re: Question about biweekly payments Date: 9/17/2001 6:47 PM
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I've seen references to paying CC's twice a month. How does this work? Do you pay the entire minimum or desired payment and then tack on another payment on top, or do you just split up your desired payment and send half early and half on time? Does this, in fact, lower your principal quicker?

Hi Jenn,

Realistically speaking, if you want to do the twice-a-month thing, you have to cough up the minimum payment first, and only then start thinking about sending the credit card compay some extra cash. You might not want split your minimum payment into two halves and send them in every other week! <B/>

Why so?

Well, because usually you have only about two weeks (or even less) between the moment your statement appears in your mailbox and the moment you have to mail in your payment. Now, there is a good chance that this payment will be the only one credited in this billing cycle. This is because your next twice-a-month payment will go out in your own envelope with no barcode on it, and no payment slip inside. And, as you might guess, only pyments sent in those credit-card-provided envelopes with the payment slip get processed fast. Any other payments (irregular envelopes, no payment slip, no barcode, addressed to wrong department) get processed very slowly. So slowly, in fact, that such payments might easily take up to a week to get credited to your account. Add one week for mail delivery here, and you get two weeks. And anything over two weeks puts you into the next billing cycle.

So if you wish to pay off your credit card debt faster, send in the minimum payment first. And then send in anything extra anytime you feel like doing it. The actual mailing date of this second payment matters less than the fact that you've made it at all.

2195501y


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Author: 2195501y Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91297 of 308881
Subject: Re: Question about biweekly payments Date: 9/17/2001 6:49 PM
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sorry for the bold font, folks.

2195501y

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Author: wildgirl Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91301 of 308881
Subject: Re: Question about biweekly payments Date: 9/17/2001 9:54 PM
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No need to say sorry.. For the ones with allergies.. what has been out in force these last few days??..and ! rebuilt eyes, I love bold...

wild :)
a better Wild through surgery. Now these allergies......

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Author: mdpeterso Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91342 of 308881
Subject: Re: Question about biweekly payments Date: 9/18/2001 12:38 PM
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"I've seen references to paying CC's twice a month. How does this work? Do you pay the entire minimum or desired payment and then tack on another payment on top, or do you just split up your desired payment and send half early and half on time? Does this, in fact, lower your principal quicker? Thanks, Jenn "

Jenn: No, the argument goes kinda like this: If you're gonna send a CC payment of, say, $100/mo, send them $50 every two weeks instead. This scenario works if you have an account closed and are working to pay it down.

Since interest charges are computed by CC co's using an average daily balance method, the sooner you get a payment in, the less avg daily balance you'll carry when the recompute the finance charges for the next month.

Also, since there are 52 weeks a year, paying every two weeks will make the equivalent of 13 monthly payments. People do this on their mortgages all the time. (though not me).

Once the $$ is "pre-taken" from your biweekly paycheck, your comsumption habits will come in line with your reduced spending $$. This overall leads into the "pay yourself first" and "live below your means" type stuff.

Hope this helps,
Mark in Maryland

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Author: devbost One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91350 of 308881
Subject: Re: Question about biweekly payments Date: 9/18/2001 1:45 PM
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2195501y made a good point about the expeditiousness with which CC companies process "in-between" payments that arrive in plain white envelopes with no billing coupon attached. One thing you can do that has worked very well for me is to simply set up bill pay with the CCs themselves at their web sites. Both of my cards allow me to do this and I send in all my payments this way (the money is deducted right from my checking account). The money is credited to my account generally within 2 business days, and I have the added perk of not spending money on stamps!

-Devin

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Author: Caliban30 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91450 of 308881
Subject: Re: Question about biweekly payments Date: 9/20/2001 12:50 AM
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Well, because usually you have only about two weeks (or even less) between the moment your statement appears in your mailbox and the moment you have to mail in your payment. Now, there is a good chance that this payment will be the only one credited in this billing cycle. This is because your next twice-a-month payment will go out in your own envelope with no barcode on it, and no payment slip inside. And, as you might guess, only pyments sent in those credit-card-provided envelopes with the payment slip get processed fast. Any other payments (irregular envelopes, no payment slip, no barcode, addressed to wrong department) get processed very slowly. So slowly, in fact, that such payments might easily take up to a week to get credited to your account. Add one week for mail delivery here, and you get two weeks. And anything over two weeks puts you into the next billing cycle.

I use my banks online bill pay service.. Thus, I don't use the nice billing/barcoded slips or the CC envelopes. I had a one or two problems when I origionally started setting up my creditors on this service. When such a problem did occur, I did the following:
1) called the creditor and asked for the late fee to be removed.
(and if that failed)
2) called my bank and had them straighten it out. (and they have always taken care of it for me).

Yes, your right, I try to pay my bills 3-4 business days before the due date. Simply because of what you have stated. My checks get sent to a different department (sometimes in a different city) to be processed because I don't have the 'barcoded' slip or envelope needed for the automated processing (that is if my bank needed to actually send a check to the creditor).

Things you can try to speed of the process if you don't have a slip.
1) contact your creditor, and ask if there is a different address/department that handles overnites and/or payments made without the billing slip. (Some of my creditors have me sent my payments to a different location.)
2) Photocopies of the slips should be able to be read by the machine at the processing plant (the machines read the barcodes). (the envelope doesn't have anything to do with it)

You always can send two payments in that are larger than the minimum. Then it doesn't matter.

To answer the origional posters question.
You need to be aware of how your interest is calculated. On some credit Cards, They take the daily balences for the billing cycle and divide that number by the number of days in the cycle to get an AVERAGE Daily balence.

For example:
if a person is carrying a balence of 1000 dollars and your 100 dollar payment arrives at the 25th day of the a 30 day billing cycle.. they take
1000 * 25 + 900 * 5 / 30 = 983.333
whereas if you had sent your 100 dollars in on two 50 dollar payments one on the 10th and one on the 25th it would look like this.
1000*10 + 950 * 15 + 900 * 5 /30 = 958.333

These average daily balences are then multiplied by the interest rates.

The person who sent in two payments lowered their average daily balence faster and thus will pay less interest on the month without spending any more money than the first person did.

I'm sure there are people here who can explain it better than I did.

Caliban



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Author: EMTneeded One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 95775 of 308881
Subject: Re: Question about biweekly payments Date: 10/23/2001 7:07 PM
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I get paid weekly and also have bill pay set up through my bank, unlimited checks. I send all my cards a weekly check. No one has complained, even if it is only $10 they still take it. As for the point about only 2 weeks between getting a statement and due date. 1-2 checks have already posted for the month by the time I get the statement. The roughest part is the first 2 months, making sure they get the checks on time but after that everything runs smoothly. Heck one card increaded my limit because I paid so frequently.

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