Most people have carried a credit card balance at some point
in their lives and know the financial hole that high interest
rates create. Carrying credit balances across a number of
cards with varying interest rates only makes the impact more
significant. As a result, you could be throwing away hundreds
or thousands of dollars a year in interest payments.
Credit card companies typically charge an 18% interest rate
on credit card balances, but their introductory interest rates
(teaser rates that may last up to a year) are often as low
Suppose you have $3,000 balance and an 18% interest rate.
If you pay $200 per month, you will pay $270 more in a year
than you would if the interest rate were 6%.
Use MsMoney.com's Value
of Consolidating Credit Card Debt Tool to calculate how
much money you can save by consolidating your credit card
debt and how much faster you can pay off your balance.
The Best Reason to Consolidate Your Credit Card Debt
Lowering interest costs is a great reason to consolidate
your credit card debt, but it isn't even the best reason.
At lower interest rates, your debt grows more slowly while
you pay it off, so you end up paying it off much faster. The
sooner you pay off the debt, the sooner you can begin a savings
program where you pay yourself--as much as possible--first.
Carrying a balance at a high interest rate can make saving
or investing money senseless. Why?
If you have a $3,000 credit card balance at 18% interest,
and $10,000 invested in a mutual fund that has an average
10% return, your debt will soon outgrow your assets.
How do you turn this situation around and increase your net
- Consolidate your credit card balance on a card that has
a 6% interest rate instead of 18%.
- Use the savings from your interest payments and pay off
your credit card balance more quickly.
In effect, you are making your liabilities smaller, laying
the groundwork for creating positive net worth, and paying
yourself what you deserve. You can experiment with MsMoney.com's
Tool to see the impact of eliminating your credit card
Shopping for a New Credit Card
The Internet makes it easy to find credit cards with low
interest rates. If you're looking for a great credit card
rate, try MsMoney.com's partner, NextCard,
and start saving money today.
If you don't want to transfer your balance or simply want
to stay with your current credit card, you can try to negotiate
lower interest rates. Call your credit card company to let
them know that you're thinking of moving to a competitor for
lower interest rates. To keep your business, they may lower