It’s a new year and maybe you’ve made a resolution to clean up that outstanding credit card debt.  

The best way to do so? Pay down the principal amount of the credit card debt, which is the actual amount on the card, not including interest charges. This lowers the amount on which you can be charged interest.

The secret is, even if you are paying more than the minimum payment each month, you usually need to tell the credit card company where you want the extra money to go. You might ask where the extra money is going, if not toward principal? The card issuer will often file part or all of the extra money in the interest category. The same goes for things like auto and home loans.

Another great tip is to include a note with your mailed payment indicating that the extra amount should be applied toward the principal balance of the loan. Online banking usually makes this a very feasible option as well, with clearly marked buttons to indicate whether your payment is for the minimum balance or the principal. Without this extra step, all your efforts to pay more toward debt could amount to nothing.

It is very important to pay more than the principal amount on your credit card, but even more important to make sure you are doing it correctly.