Make a Guaranteed 15% on Your Money

I cognize that many of us have got credit cards with interest rates as high as 15-20% A year. Here are a few tips on how to lower your rates and to get quit of them all together.

If you have got got high interest rate credit cards and have a nice credit score, you can make one of two things to assist reduce your interest rates. One is to name your credit card company and inquire them if they will drop your rates (I have got done that myself and it makes work. It doesn't work every clip but it could be a phone phone call worth $100's for you). In many cases, they will drop your rates for a short time.

For example, if for a year, the credit card company driblets your rates from 15% to 5% and you have got a $5,000 debt, that is a great nest egg of $500 in interest for the year. This volition free up some money for you to pay off the debt quicker. If a credit card company isn't willing to work with you and driblet your interest rates, expression for a better interest rate credit card. Just watch out for balance transfer fees, etc. Each state of affairs is different but there are millions of people who are throwing away billions of dollars a twelvemonth in interest because they either don't cognize that they can get a better rate or they don't cognize how to inquire for one. It is really as easy as picking up the phone and asking your credit card company for a better rate.

I don't urge using credit cards, of course. However, I cognize that many people make have got credit card debt. By either career the credit card company to get a lower rate or by looking for a credit card with a lower interest rate, you can cut down on your debt.

If you don't have got the best credit and your credit card company isn't willing to work with you, and you can't happen a credit card that offers a better rate, see suspending any of your current investment and focusing your attention on paying off your debt. For example, if you had a $5,000 credit card debt at 15% interest paying that measure off is like getting 15% on your money tax free and with no risk.

What make I mean? Well, if you had $5,000 in credit card debt at 15% interest over the course of study of the twelvemonth you would owe $750 in interest. ($5000 x 15% = $750). So the sum amount that you owe is now $5,750. Let's states you also happened to have got $5,000 in the bank and instead of paying off your credit card, you just invested it. So you invested in the stock market or common monetary fund and during that twelvemonth the stock market had A nice twelvemonth and you earned 15% on your money (Historically, it averages about 10% a year). So you made $750 in net income off of your $5,000 investing in the stock market/mutual fund. You then unfastened up your credit card measure and the amount is $5,750 as well.

This clip you so make up one's mind that you desire to pay off your credit card, even though you could have got done that last twelvemonth when the balance was $5,000. Well, now you sell your investing in the stock market/mutual fund. You pay $50 in committees to your broker and 20% to the authorities for taxes ($150). So your nett earnings are only $5,550, but you have got a measure of $5,750. Even after you pay all the money you just got out of the stock market/mutual monetary fund you still owe the credit card company $200 more than (Of course of study that is just an illustration and those figs could change, etc.).

The point is that paying off credit card debt is the best investing that you can make. It is a GUARANTEED return, and you don't have got to take taxes out of it as you are just paying back a debt. The above illustration showed a 15% net income in the stock market/mutual fund. What would have got happened if the investing only went up 5% instead of 15% Oregon what if it went down 15%? You would be in an even a bigger hole. In the illustration above you would have got needed a 20% tax return in order to pay off the credit card in full after committees and taxes. That is double the average tax return for the stock market. Historically, that is asking a batch when you could just have got got paid it off from the beginning and not have to deal with the emphasis of the debt.

I always suggest paying off personal debt (which includes credit cards, automobile loans, piece of furniture loans, personal loans, and student loans) prior to investment money in the stock market/mutual fund.