I’m doing something I never thought I’d do: I’m going against “The Math.” “The Math” tells me that I should aggressively pay down my credit card as quickly as I can, throwing every spare penny at it. “The Math” says that because the interest on my card is nearly 18%, and my savings accounts only earn about 5%, that my money is better spent on that credit card balance.
And for several months, I’ve been listening to “The Math.” And it has, up until now, served me well: I’ve managed to get my credit card debt down below 75% of my limit. This isn’t great, as far as my credit score is concerned, but it’s a definite improvement.
But “The Math” does not know all, and it’s time for a change. A temporary change. I’ve reduced my credit card payments to the minimum plus $1. Why the minimum plus $1?
- It looks better on my credit report, because it doesn’t show up as “the minimum payment.”
- It makes me feel better, because I’m not making “just the minimum payment.”
- It brings the payment up to a nice, round $40, which appeals to my number-based brain.
And the money that was previously earmarked for my credit card is now headed for my newly formed emergency fund. I want some security. I don’t want to worry that my car is going to break down and I won’t be able to pay for it. I don’t want to panic if my income drops one month. And I definitely don’t want to have to borrow more money if I hit a rough spot.
But “The Math” shouldn’t worry – I’ll be back for that credit card debt soon enough.