November 03, 2010
Courtesy of USAA
Many people may choose to ignore how much they are throwing away in credit card interest, and how long it will actually take to pay off their debt.
But committing yourself to getting out of debt can save you a lot of money over time.
The following example shows how much you can save by increasing your monthly payments. Of course, this assumes that you don't rack up more debt along the way.
|Paying Down Credit Card Debt|
|Amount of Debt||Interest Rate||Monthly Payment||Time to Pay it Off||Interest Accrued|
|$10,000||12.0%||2% of outstanding balance||368 months (over 30 years)||$9,696.43|
|$10,000||12.0%||$200||65 months (over 5 years)||$2,989.61|
|$10,000||12.0%||$500||22 months (under 2 years)||$984.83|
Here are some tips to get your debt under control from USAA financial planner June Walbert :1. Know How Much You're Spending
Creating and sticking to a budget takes discipline, but it's the best way to watch what you're spending while setting something aside for savings.2. Stop Racking Up More Debt
Avoid charging more than you can pay off each month. Put the credit cards away if you have to.3. Save for a Rainy Day
If you don't have an emergency fund to cover at least three months of basic expenses, you should save money and pay off your debt at the same time. By having cash on hand to pay for emergencies, such as car repairs or a job layoff, you'll be less likely to sink further into debt.4. Consolidate to Lower Interest
Transfer your high-interest rate debt to a low-rate card. Look for low rates on the life of a balance transfer so you don't have to worry about playing the transfer game every year. Cut up the other cards and close the accounts.
Check rates on USAA's credit cards.USAA Can Help
USAA's financial advisors can help you tackle debt and help you prepare for retirement, college, or whatever goal you want to reach.
Walbert explains, "People wonder, 'Should I stop contributing to my retirement plan to pay off my credit card debt? Or should I pay down my mortgage or car loan?' I help members develop a prioritized plan to pay off their debt."
Walbert also stays in touch with our members and tracks their progress. "That causes many of them to think twice about making purchases that will make their financial situation worse," she says.