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How to Double Your Money with Your Credit Cards

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By Eva Norlyk Smith, Ph.D.
May 22, 2009

Want to know how to more than double your money? Without any risk whatsoever? Guaranteed, failsafe, totally in the bag. For real.

Sure, you might say. Does this by chance involve a bridge in Brooklyn?

Actually, no. It involves something much more down to earth—so to speak. Your credit cards. If you have credit card debt racking up high interest charges, paying off the debt faster will save money. You’d be surprised just how much.

Holding high credit card debt with a high APR for a long time is one of the worst things you can do for your financial health. Unfortunately, this is exactly what happens when you pay only the minimum on your credit cards each month.

Even if you pay more than the minimum, how much you pay each month makes more of a difference than most people realize. Let’s say you owe $10,000 in credit card debt at 19.99% APR. The table below shows you just how much interest you’d pay for the life of the loan at different levels of monthly payment.

A. Monthly
D. Total
Interest Cost
E. Total $
Paid in Accelerated
G. Total saved
for each $ in accelerated payments
200 109 9.08 $11,681
300 50 4.17 $44,718 $5,000 $6,963 $1.39

As you can see, when you pay $100 more a month, (i.e., $300 instead of $200), your total interest costs for the life of the loan are $4,718 instead of $11,680. That’s a $6,963 savings in interest costs (column F).

If this was an investment instead of credit card payments, what return would you be earning on the money you put into the accelerated payments?

In this example, if you pay $100 more each month ($300 instead of $200), it will only take you 50 months to pay off the debt; or $5,000 over the life of the loan (see column E below). That $5,000 in accelerated payments, in turn, enables you to save $6,963 in credit card interest costs.

This means that each dollar you save every month and use to pay down your credit card debt faster produces a savings in interest charges, which effectively more than doubles your money. In this example, $5,000 in earlier payments translates into a savings of $6,963. Putting it another way, for each dollar in early payments, you save $1.39 in interest charges. That should make you feel good about finding ways to save to come up with an extra $100 a month for paying off your debt.

Of course, the actual savings will vary depending on your APR, how much credit card debt you have, and how high your interest rates are. To see how these numbers would apply to your own credit card debt, check out this handy credit card debt calculator from Bankrate.com.