The really dumb financial mistake 99 percent of us make every month

You know better than to do this. And yet...

Whether you're good or bad at managing your finances, there's one mistake that's very, very easy to make and can cost you tens or even hundreds of thousands of dollars: Making the minimum payment on your credit card every month. If you pay a little more than the minimum, don't pat yourself on the back. That's a pretty bad move too.

Making a minimum payment (or minimum payment plus, say, $20) is such a bad move that as part of the Credit CARD Act of 2009, credit card companies were required to print on each invoice just how much interest the cardholder would pay over time by making minimum payments. They're also required to show how much you'd have to pay to pay off the card in three years, and the many thousands you'd save by doing so.

But even though we've all been thoroughly warned about the consequences of paying off credit card debt too slowly, a surprising number of us still do just that. According to new research, fewer than 1 percent of credit card debtors have adjusted their payments to hit that three-year goal, even with the benefits of doing so spelled out in black and white. And 29 percent still pay the minimum or just slightly more every month.

You may think there's a simple explanation: Incomes have grown slowly in the recovery and people simply can't afford to pay more than the minimum payments. Not so much. The researchers observed what happened when credit card companies adjusted their minimum payments upward. Most of the time, consumers paid the higher amount, suggesting they could have paid that much all along. The National Bureau of Economic Research, which conducted the study, estimates that 9 to 20 percent of cardholders could pay substantially more than the minimum amount but choose not to, even though they see the future result of that choice in black and white every month.

RELATED: Here are a few tips to teach your kids about money:

Lessons that teach your kids to save money
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Lessons that teach your kids to save money

Play money-centered board games or games on apps, like Monopoly or Money Race.
It's an interactive and fun way for your kids to learn about basic financial practices without feeling like they're being lectured.

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Give them an allotted amount of cash to spend on lunch each week.
Your child will learn how to budget accordingly throughout the week, figuring out how to balance spending money on food some days vs bringing their own on other days (something that can be directly translated into the adult workplace).

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Have them write down or tell you their absolute dream toy.
Then, show them that it's possible to have that toy if they save x enough money for x amount of weeks.

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Give them an allowance.

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Stick to a set time and date each month for giving your child their allowance.
Practicing giving your children their allowance every other week or on certain dates of each month will help them prepare for set paydays in the working world--it will teach them to budget out and how to know when to save up in anticipation.

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Match your child's savings each month.
This will imitate a 401K and show your child ways in which saving can (literally) pay off.

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Have your kid organize their funds in to different jars to represent different accounts.
Examples could be "Saving", "Spending", "Charity", "Emergency", "College".

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Take your kids grocery shopping and explain certain choices you make with your purchases to them.
Your children will benefit from knowing what's best to purchase name brand vs. generic, why some snacks are better to buy in bulk, etc.

Photo credit: Getty


If you're among the millions of people who pay the minimum balance or just a little more on their credit cards, I'm not judging you. I've done that myself many, many times. Despite the Credit CARD Act rules, credit card issuers are masterful at subtly suggesting that making the minimum payment is the right thing to do, which it is from their point of view.

But here are some strategies that can help you get out from under credit card debt a little more quickly:

1. Adjust your automatic payments.

Many credit card companies give you the option to have the minimum payment automatically deducted from your bank account on the due date every month. Great idea--it spares you those obnoxious $25 late fees you may have to pay if you miss the credit card company's deadline by even a few minutes. The problem with this is that you have to make a second, separate payment if you want to pay more than the minimum and for most of us, inertia prevents that from happening.

So use your own laziness to your advantage. Instead of setting up an automatic minimum payment with the credit card company, set up an automatic payment to the credit card from your bank. Tell it to send out the same amount every month and make that amount substantially higher than the minimum balance. That way, you'll have to take action if you want to reduce your payment to the minimum amount, and of course you can always do that if money is tight in a given month.

2. Pay more than once a month.

You might know that making a big monthly payment is a smart move, but can't pull that money together all at once. Luckily, you don't have to. You can pay your credit card company as often as you like, so use that fact to your advantage and set up manageable payments on a more frequent basis such as once a week or once every two weeks.

If you're one of these people who pays for everything with your credit card to earn rewards and then pays off the (large) bill every month, this approach will have the added benefit of improving your credit score (because you'll be using less of your available credit).

3. Make sure to pay off automatic charges to your credit card.

Utilities love setting up automatic payments from your credit card and many online services, such as Netflix, require you to do that. One simple solution is to switch these automatic charges to a debit card so that you're making payments as they come in instead of using credit. If you don't do that, be very careful to at least cover those automatic charges when you pay your bill every month. (If you follow Step 1, you can make sure to create an automatic payment that pays them off.) Otherwise, making the minimum payment will put you deeper and deeper in the hole since it likely won't cover the new charges. Your total balance will keep going up. And your goal of clearing your credit card debt will get farther away instead of closer.

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