By LISA HAARLANDER
The Buffalo News
8/2/2004

Sometimes it feels like no matter how much money a month you send to the credit card companies, you will never be debt free. The high interest rates erode much of the dent your payment makes on the principal. If you already have the lowest interest rate you can find and you can't afford to send in more money each month, there is still a way to shorten your stay in credit card purgatory.

Instead of sending in one payment each month, send half that payment every two weeks. Homeowners have long done this to shorten the time - and money - it takes to pay off a mortgage. You can do the same with your credit card.

"It's a strategy that we know people use," said Daniel Ray, editor in chief of Bankrate.com, a resource for consumers looking for information on credit cards, bank rates and a host of other financial products. "It's a way to increase the amount you pay and cut repayment substantially."

Let's say you owe $4,000 on a credit card that charges 12 percent. If you send in $100 per month, it will take you 52 months (over four years) and you'll pay $1,134 in interest. If you send in a payment every two weeks, you'll be debt free five months sooner and it will cost you $114 less.

Paying biweekly has even bigger payoffs if you're sending in only the minimum balance. With minimum payments it would take 17 years and $2,500 in interest to pay off that same $4,000 debt. If you paid biweekly, it would shave off two years and $300 in interest.

Paying biweekly on a credit cards helps primarily by tricking you into sending your credit card company an extra payment each year. Because you're sending in 26 half-payments, you end up making 13 monthly payments each year.

It's that extra payment that makes the world of difference. Because credit card balances are relatively small (compared with a mortgage) and repayment time is shorter (at least if you pay more than the minimum), paying biweekly doesn't help much with the interest accumulating.

"You would only save pennies on the finance charges," said Janis Tarter, spokeswoman for Citibank.

Paying your credit card biweekly takes discipline. If you get your paycheck every two weeks, choose the day or two after you get paid as the day you always write a check to the credit card company.

"A lot of folks are paid biweekly so it fits in with their schedule of income," Ray said.

Don't set up an automatic bill pay with your bank. Most financial institutions have you choose a calendar date for the payment. If you tell it to pay your credit card on the first and 15th of every month, you lose sending in that extra payment each year.

If paying every two weeks is too much of a hassle, consider sending in an extra payment once a year. Perhaps on your birthday when there may be some extra cash on hand.

You don't need a special envelope or coupon that comes with your monthly bill to send in an extra payment. Just send it to the same address and make sure to write your account number on the check.

Here are some other ways to reduce your debt, even if you can't afford to pay more:

• Don't put any new charges on the card. You don't get a grace period on those new purchases if you're already carrying a balance. You're charged interest immediately.

• Ask your credit card company for a lower interest rate.

"If you're a customer in good standing and they want to keep you, your credit card issuer may be likely to lower your payment," Ray said. "It won't work every time, but we do see it work."

Never hurts to ask.

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