Snowflake method - Using micro-payments to pay off cards

By: on 2004-05-13
Ask Good Nelly

If you wish to reduce your credit card dues faster, you may try making micro-payments on your cc accounts. This is the Snowflake method of paying down your debt.

How to trim your cc debt with multiple micro-payments

This is a method where you make additional payments towards your credit card (cc) dues and reduce the balance faster. These micro-payments can be just a few dollars which you've earned as additional income or received as a monetary gift. But a number of such payments do add up to reduce your card balance and save you thousands of dollars in interest. So, every time you get some extra money from anywhere, say by selling items at eBay, earning extra income through a part-time job, getting bonus at work etc, make it your priority to use the cash for paying down your dues.

3 Tips to make the Snowflake method work for you

Follow the 3 tips given below and use the Snowflake method to your advantage.

Avoid letting creditors deduct your payments: When you make micro-payments on your bills by following the Snowflake method, see that the payments are transferred to the cc account from your checking account. That is, you should send the payments via online bill pay. It is better to not allow the cc company to deduct the payments from your checking account.
Mention where you wish to apply the payments: Prior to sending the micro-payments, inform the creditors that they should apply the payments towards your principal balance. This can be done by writing "Apply to principal" on the check or making a note on the online transaction. Otherwise, chances are that the creditor may think you're prepaying your next month's bill.
Have enough cash for minimum payments: While you make micro-payments, it's important that you keep aside enough cash to pay the minimum next month. So, if you don't have enough cash reserved for next month's minimum payment, it is better to not pay extra towards the cc account in the current month.

Multiple monthly payments - Another way of reducing your balance

You can begin making multiple monthly payments on your cards by paying down a small amount towards the account each week. Or else, you can pay off your card dues just as one repays a bi-weekly mortgage.

In a bi-weekly mortgage, you divide your monthly loan payment into two and then make a payment in every 2 weeks. So, considering there are 52 weeks in a year, you need to make 26 half payments. This means you have to make 13 monthly payments instead of 12. You can apply the same principle in order to get rid of your card dues.

The best way to continue making monthly payments is by taking advantage of sudden increase in your earnings and making use of windfalls such as tax rebate or Stimulus Check.

Apart from making micro-payments and multiple monthly payments on your credit card bills, you can follow some smart tips to pay off the card dues. What is most essential is to plan a monthly budget and follow it strictly. Slash your utility expenses and phone bills. Try to reduce other loan commitments by consolidating them into a single monthly payment. However, the best way to avoid adding to your cc debt is to leave the cards at home, when you go out. This way you can avoid temptations to make a purchase and stick to your budget thereby minimizing your chances of ending up in debt.

Last Updated on: Thu, 13 May 2004

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