Week 13: Credit Card Countdown
Mankind has a tendency to get so caught up in details that we forget to address larger,
more consequential issues. I would like to think that I am generally an exception, but I
recently caught myself committing a big financial blunder.
You see, like most Americans my husband and I finance our vehicles. Unlike most
Americans, we have a credit record that gives us access to extremely low interest credit
cards. This means that when we bought our last vehicle a year ago, we could turn up
our noses at high interest car loans and instead put the balance on a credit card. For
the first year, our interest was 2.9% and a month ago it rose to 5.9%.
I wasn't thrilled, but it still seems like a fair deal. That is, until I realized that the money
sitting in my savings account earns between a quarter and a half of a percent. That's
less than inflation! So if left alone, my debt will rise quickly and my savings diminish
almost as quickly. Getting financially ahead with those statistics is like swimming
against a strong current--you'll wear yourself out before you make any progress.
We could bemoan the unfairness of banks and lenders, but we're the ones at fault.
They are very open about their interest rates. They clearly are in it to win it. We should
be too! So I took a chunk of my savings and paid off that credit card. If I had taken a year
to pay off the remaining debt, I would have spent $129.25 in interest. That's for a small
amount on a low interest card! If any of you have larger amounts of debt or higher
interest rates, you have more to gain from this one simple change.
As for the lousy savings account, I plan to leave about a thousand there and transfer the
rest to a CD. They earn around five percent right now, which substantially more than any
savings account.
Amount Saved: $129.25
Difficulty on Scale of 1-5: Negative 8 billion. It doesn't take a lot
of brain power to write a check.
Time: 0--I had to pay the credit card bill anyway, so no extra
time was needed.
Check out the Frugal Habit of the Week Archives
Mankind has a tendency to get so caught up in details that we forget to address larger,
more consequential issues. I would like to think that I am generally an exception, but I
recently caught myself committing a big financial blunder.
You see, like most Americans my husband and I finance our vehicles. Unlike most
Americans, we have a credit record that gives us access to extremely low interest credit
cards. This means that when we bought our last vehicle a year ago, we could turn up
our noses at high interest car loans and instead put the balance on a credit card. For
the first year, our interest was 2.9% and a month ago it rose to 5.9%.
I wasn't thrilled, but it still seems like a fair deal. That is, until I realized that the money
sitting in my savings account earns between a quarter and a half of a percent. That's
less than inflation! So if left alone, my debt will rise quickly and my savings diminish
almost as quickly. Getting financially ahead with those statistics is like swimming
against a strong current--you'll wear yourself out before you make any progress.
We could bemoan the unfairness of banks and lenders, but we're the ones at fault.
They are very open about their interest rates. They clearly are in it to win it. We should
be too! So I took a chunk of my savings and paid off that credit card. If I had taken a year
to pay off the remaining debt, I would have spent $129.25 in interest. That's for a small
amount on a low interest card! If any of you have larger amounts of debt or higher
interest rates, you have more to gain from this one simple change.
As for the lousy savings account, I plan to leave about a thousand there and transfer the
rest to a CD. They earn around five percent right now, which substantially more than any
savings account.
Amount Saved: $129.25
Difficulty on Scale of 1-5: Negative 8 billion. It doesn't take a lot
of brain power to write a check.
Time: 0--I had to pay the credit card bill anyway, so no extra
time was needed.
Check out the Frugal Habit of the Week Archives
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