| Credit card companies are in business to make | | | | The best way to do that may be to select the |
| money. Make no mistake about that. And if you | | | | card with the highest interest rate and reduce the |
| are not smart about your credit card debt, you | | | | principle on that card first. Other steps in a |
| can end up making them 18 percent on their | | | | realistic plan to reduce credit card debt would |
| investment at about a $1,500 per year cost to | | | | include creating a cash flow budget, avoiding new |
| you. Whether you enrich the credit card | | | | debts, reducing spending overall and looking for |
| companies or save the money yourself is up to | | | | the best card for balance transfer. |
| you. | | | | Then, after you have reduced your debt down to |
| And if you turn around and invest just the | | | | levels that will allow you pay your monthly balance |
| savings on your credit card interest, it can | | | | in full, do it. If you don't carry a balance from |
| amount to a pretty nice little nest egg for the | | | | month to month, you are essentially using the |
| future. | | | | credit card company's money as an interest-free |
| If your card charges 18 percent interest, and you | | | | loan. |
| owe $5,000, your credit card company may want | | | | Credit card companies want "revolvers", people |
| you to make a minimum payment of $150 a | | | | who carry a balance from month to month and, |
| month. Even if you do not buy anything else, it will | | | | thus, pay interest every month. "Transactors", as |
| take nearly four years to pay off the $5,000, and | | | | they are called, pay off their balance every |
| you will end up paying $2,000 on top of it interest | | | | month and card companies put up with them in |
| charges. That can turn into a huge chunk of | | | | hopes that they will eventually becoming |
| money over the years. | | | | revolvers. |
| By 2007, Americans carried an average of $6,600 | | | | By becoming a transactor, rather than a revolver, |
| of credit card debt, according to Millions of | | | | you can save, and even make, lots of money. If |
| consumers regularly carry much more than that. | | | | you save $1,500 a year in credit card interest, it |
| And that's just credit card debt, often the most | | | | can add up to $45,000 in interest savings over 30 |
| expensive kind. Typically, the nominal interest rate | | | | years. If you invested $100 a month out of your |
| on a home equity loan or mortgage is less than | | | | interest savings in a mutual fund earning 9 |
| half that of credit card rates. | | | | percent, it could add up to roughly $184,000 in 30 |
| If all that debt represents a liability, it also | | | | years. |
| represents enormous opportunity. Getting rid of | | | | Whether you opt for the investment or just the |
| credit card debt is the equivalent of earning an | | | | savings, it is still quite a sum. Over a lifetime, a |
| extra 18 percent. It makes sense to start | | | | little common sense about credit card debt and a |
| reducing debt as soon as possible. | | | | little simple math can pay great dividends. |