Credit card debt is terrible. To a financial planner, credit card debt is like having a cluster of thousands of baby spiders crawling on your body and under your clothes: You cannot act fast enough and there is no amount of modesty worth leaving the situation unresolved.

Credit card companies make it easy to incur credit card debt. They send you a statement suggesting that you only need to make a small token payment before the deadline. While the statement itself will report the credit card balance to you, the payment slip will often suggest only making the minimum payment. Credit card companies love revolvers (people who don’t pay off their credit card every month) because that is where they make most of their money. Currently, credit card companies make about $130 billion in credit card interest and fees each year.

Do not fall for their trap. You save money when you pay off the entire credit card balance each month.

Every so often, I meet a prospective client who carries a credit card balance even though they could easily pay off their credit card debt.

A classic example would be a saver with $100,000 saved in a checking account with a $20,000 credit card balance. However, the dollar amounts do not matter. Our first recommendation in each of these cases is to pay off the credit card debt immediately.

Yes, it is a bother to pay each month.

However, what you may not realize is that when you fail to pay off your credit card each month, subsequent charges all begin accruing interest from the date of purchase. Even just $3,000 of monthly purchases on an overdue credit card with an annual interest rate of 18% would be mindlessly adding about $540 to your annual spending even if you paid off the $3,000 each month.

Additionally, if you miss making the token minimum payment, the credit card company can change your terms assigning a large late fee and increasing your annual percentage rate (APR) to a higher rate. Then, they can begin charging interest on every purchase. Your account will be reported to the credit bureaus as past-due. Your credit score will go down.

Quickly, a small mistake turns into an expensive mess.

This is why our first priority in “Account Funding Priorities: A Savings Waterfall” is pay off any credit card debt and our number one rule in “Seven Rules to Using a Credit Card Safely” is pay off your credit card in full each month.

I personally always set my credit cards up with an automatic payment from a bank account for the full credit card bill every month. I don’t trust the U.S. Postal Service to deliver my bill in a timely way. I don’t trust myself to pay the bill in a timely way. And I don’t trust the post office to deliver my payment back to the credit card company in a timely way. It isn’t worth risking a missed payment.

If you are carrying a balance, pay it off now. No reason to wait another moment.

Photo by Steve Gale on Unsplash