Round Up Payments For Quicker And Pain-Free Debt Eradication

Bills rarely come in nice clean whole numbers like $US100. They pile up on your desk with demands like $94.38, $294.38 and other decimal-toting figures. Rounding up your debt payments, even by a dollar, can yield surprising long-term savings.

Photo by Rombia.

Over at the financial blog The Simple Dollar they crunched some numbers to see just how much you would save if you started rounding up your debt payments. Using a hypothetical mortgage of $150,000 with a 5% rate of interest and a payment of $805.23 they played with rounding to the nearest dollar, 10 dollars and hundred dollars. Rounding up a mere 77 cents to $806 saves $363.64 over the life of the loan. You won't be buying a car with that kind of savings but for less than a buck extra month over the course of the loan it's a nice chunk of change. Rounding up to the next 10-dollar mark for a payment of $US810 saves you $2220.67 — a savings incurred by only $477 extra a month. If you round up to the nearest hundred mark and submit $900 payment per month — $9477 over your regular payment — you save a whopping $34,605.19 over the life of the loan which is indeed enough to buy a car.

Check out the full article for tips on automating your finances and how you can use automation to round up not just a single bill but your entire set of bills for the month. Have a money tip or trick? Let's hear about it in the comments.

Rounding Up Debt Payments: Does It Really Help? [The Simple Dollar]


Comments

    In case it's not obvious (which it wasn't to me from the opening paragraph), this only works for debts that charge interest.

    There's no point doing this with your phone bill. In fact, the opposite applies: pay the exact amount as late as possible and keep your leftover pennies earning interest or paying off interest-bearing debts.

    Round up $805.23 to $806 ("mere 77 cents")
    Round up $805.23 to $810 ("only $477 extra a month")?? don't you mean $4.77 (notice the decimal point)
    Round up $805.23 to $900 ("$9477 over your regular payment")??? WOW 9K more per month, forget a decimal point again?

    This is ignoring the fact that anyone would have a hypothetical mortgage of only $150,000 these days and for only 5% interest!

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