Eight Ways to Start Saving Now
PAGE 5
Lesson 5: Use Your Savings to Pay Off Credit Cards
Take money out of your savings or money market account to pay off high-rate credit card debt. This makes sense as you're likely only earning 3 or 4 percent (max) on your savings, while you're paying 16, 18, even 24 percent on your credit card. By eliminating the debt, you gain an instantaneous 12 or 14 or 20 percent. Why? Because you're no longer spending the money on interest.
Map to a Million
Take $4,000 out of your savings account to pay off your credit card bill.
Annual savings on interest: $720
10-year total: $12,178
20-year total: $37,611
30-year total: $94,063
Do it, say this, and sound smart: "I used to think having money in savings was safer, but I'm so far ahead by paying off my credit cards. If I have an emergency and don't have the cash, then it's smart to charge."
Take money out of your savings or money market account to pay off high-rate credit card debt. This makes sense as you're likely only earning 3 or 4 percent (max) on your savings, while you're paying 16, 18, even 24 percent on your credit card. By eliminating the debt, you gain an instantaneous 12 or 14 or 20 percent. Why? Because you're no longer spending the money on interest.
Map to a Million
Take $4,000 out of your savings account to pay off your credit card bill.
Annual savings on interest: $720
10-year total: $12,178
20-year total: $37,611
30-year total: $94,063
Do it, say this, and sound smart: "I used to think having money in savings was safer, but I'm so far ahead by paying off my credit cards. If I have an emergency and don't have the cash, then it's smart to charge."
Reprinted from Make Money, Not Excuses by Jean Chatzky with permission from Crown Business, a division of Random House, Inc. Copyright © 2006 by Jean Chatzky.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.
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