How much do you spend daily on small purchases like coffee and newspapers? If you made small payments to your credit cards instead, would you save money? Called micropayments, small payments to your credit cards can reduce your interest costs and the amount of time it takes to pay off your debt. However, some credit card companies may change fees for extra payments.

## Reduced Interest

Interest, also called annual percentage rate, is your fee for borrowing money on your credit card. If your interest rate is 10 percent and your balance is \$10, you will pay a fee of \$1. Bill Hardekopf of LowCards.com notes that most credit card companies charge interest based on your average daily balance. If you pay a little each day, you reduce that balance and therefore the interest you are charged, saving money.

## Shorter Payoff Times

If you pay a small amount daily as well as your minimum payment, you can drastically cut your payoff time. For example, if you owe \$5,000 at 5 percent interest and are making minimum payments of \$25, it will take you more than 34 years to pay off the card. If you make your minimum payment of \$25 on the same card, but also pay \$5 per day, you'll pay an additional \$150 in a 30-day month and pay the card off in just over 2.5 years. Use an online credit card payoff calculator to determine how long it will take you to pay off your credit cards using small daily payments. Even if you can't make both small daily payments and your minimum due, making small payments will reduce your payoff time because you will pay less interest, and the smaller your balance, the faster it is to pay off.