Want to earn at least 20% on your money? Here's a guaranteed way how to: get out of credit card debt. Here are some great thoughts, ones that I agree with 100%, from Yahoo on this subject:
It's awful to be saddled with credit card debt. But you're not alone. A big chunk of America is struggling under the crushing load of credit card debt -- and "crushing" is a rather appropriate word, given that many of us are being socked with interest rates above 30%.
There's a small silver lining to this massive cloud: every dollar of debt you pay off will save you a lot in interest payments you won't have to make on it. For example, if your credit card's interest rate is 25%, by paying off $2000 of debt, you'll save yourself from having to pay $500 in interest on it -- this year, and next year, and the year after. That's sort of like earning $500, or 25%, this year and in the following years.
And if you think that I'm exaggerating by using rates as high as 25%, think again. As I noted in an earlier article, the average default interest rate (the rate you pay if you miss a monthly payment) for credit cards was about 30% in 2004, with many rates now in the 35% territory.
I hate debt and am glad I have none. But if you have some debt, please realize that paying it off is a guaranteed investment -- it's money that you're "earning" by not having to pay it later to service your debt. And with savings yields currently being around 5% and the stock market in a seeming plateau, getting rid of debt costing you 10%, 15%, 20% or more is a great deal.
For some specifics on how to get out of debt, see these links:
You missed an important point. If you pay 25% on your credit card (this strikes me as too high, but what the heck), and have $1,000 in cash sitting around. You would have to earn 33% on that money to pay the interest on the credit card balance and thus come out ahead relative to paying it off. Interest income is taxable, while the interest you pay to credit card companies (I think) is not tax deductible. So it's actually like earning 33%! I assume a 25% tax rate.
Posted by: Kurt | July 12, 2006 at 11:35 AM
Ignore this post, I am just including the right email for the above. Sorry.
Posted by: kurt | July 12, 2006 at 11:43 AM
Great post. I dont even want to consider buying a new car unless they offer me 0% financing. All my credit cards are in their 0% apr intro stage still. I plan on making use of that.
Posted by: JW | August 02, 2006 at 06:03 AM
clarify it.please
Posted by: Amit Kumar | June 28, 2008 at 05:41 AM