In personal finance, finding effective strategies to pay off debt faster and save on interest is a top priority. American Express offers their account holders two underused features, Pay It and Plan It, that can help you achieve your debt reduction goals. By utilizing these tools strategically, you can lower your average daily balance, reduce interest costs, and ultimately accelerate your journey towards becoming debt-free.
Pay It is a feature offered by American Express that allows you to make small payments on your credit card balance as you go. Rather than waiting until the end of the billing cycle to pay off your balance in full, Pay It enables you to immediately settle smaller purchases, keeping your average daily balance lower. This is particularly beneficial if you carry a balance on your credit card because it effectively lowers the amount of debt that accrues interest by the amount you are spending. By consistently utilizing Pay It to promptly pay off smaller expenses, you can actively reduce the average daily balance and minimize the interest charges on your credit card. This works because recent charges have a 30-day grace period before accruing interest. Therefore, your payments are going toward your carried balance, not your latest purchases. Once your bill comes due, it will be an extra payment on principal towards lowering your debt.
Plan It, on the other hand, offers a solution for managing larger purchases. If you have a purchase of $100 or more, Plan It allows you to split it into fixed monthly installments for a fixed fee. Unlike regular credit card purchases, Plan It purchases do not accrue interest using the average daily balance method. This means that you can spread out the cost of a significant expense over several months without incurring additional interest charges. By leveraging Plan It, you can effectively budget for larger purchases while avoiding the burden of accumulating interest on those specific transactions. Whatever balance remains outside of Plan It will have a lower average daily balance.
The combination of Pay It and Plan It offers a powerful strategy for paying off debt faster. By using Pay It to settle small expenses immediately and Plan It to manage larger purchases, you actively reduce your average daily balance, which in turn lowers your overall interest cost. This reduction in interest allows more of your payments to go towards the principal balance, accelerating your progress towards debt freedom.
Unfortunately, many American Express customers don't realize the power of these two account features, considering them some kind of gimmick. And using these features on the AMEX Blue Cash Preferred card, or another of their personal cash back cards, customers can also use the cash back to help pay down their balance even faster.
Implementing Pay It and Plan It into your debt reduction strategy requires discipline and consistency. Start by identifying your financial goals and creating a budget that allows for regular payments towards your credit card debt. Use Pay It to promptly pay off small purchases as you make them, ensuring that your average daily balance remains low. For larger expenses, utilize Plan It to break them down into manageable monthly installments, avoiding the accumulation of interest charges. By sticking to this approach, you can make significant strides in paying off your debt faster and saving on unnecessary interest expenses.
It's important to note that while Pay It and Plan It can be valuable tools in your debt payoff journey, they are most effective when used in conjunction with responsible financial habits. It is paramount that your finances are cash flow positive. This means that you will need to spend less than you earn while you are paying down your debt. It's crucial to avoid overspending and to make consistent, on-time payments towards your credit card balance. By maintaining good financial discipline and leveraging the benefits of Pay It and Plan It, you can optimize your debt repayment strategy and achieve your financial goals more efficiently.
In conclusion, Pay It and Plan It are two features offered by American Express that can help you pay off debt faster and save on interest. By using Pay It to settle small expenses immediately and Plan It to manage larger purchases, you can actively reduce your average daily balance, lower your interest costs, and accelerate your debt payoff journey. Remember to exercise responsible financial habits and stay committed to your debt reduction goals. With the right strategy and the support of Pay It and Plan It, you can take control of your finances.