Credit Card "Investing"

If you are like most people, you don't pay off your credit card balances each month. As a result, you've created the best fully guaranteed, high yield investment opportunity available today — without even realizing it!

Where else can your investments grow 14% per year? Hint — by paying off each credit card, it's the same as earning 14% on every dollar you pay above your minimum monthly payment. (14% is the average interest rate charged for bank credit cards — retailers' cards are usually much higher: 20% to 22%; check your most recent statement to see your current APR — Annual Percentage Rate.)

Here's how to make it work for you:

Step #1. Take ALL of your credit cards out of your wallet or purse and put them in your dresser drawer. Leave them there when you go shopping. Pay cash or write a check. If you don't have enough money to buy something, don't buy it, or buy a less expensive alternative. (It won't do you any good to charge things on a 2nd credit card while you're trying to pay off the first one.)

Step #2. To maximize your "investment" results, pick the card that has the highest interest rate. Pay that one off first. Then pay off the one with the next highest rate, and so on.

Step #3. Pay more than the minimum balance every month. Select an extra amount that you'll be comfortable paying EVERY month. Don't overdo it. Pick an amount you can afford so that you won't have to make any new charges on the card you're paying off, or on any other card. Suggestion: If, for example, your minimum monthly payment is now $35, consider paying an extra $1 dollar a day ($30) on this month's bill, making your total payment $65; then keep paying the same $65 every month, even if your minimum payment declines. You'll pay off your card quicker this way.

Step #4. After you've paid off the first one, add the $65 to the minimum monthly payment required for the second card. (If your second card has a $20 minimum, your total payment would be $85 a month.) Then, follow the same approach for the third card, if you have one. You'll get rid of your credit card debt quicker than you might imagine. Then, you'll have more money to spend on the things you want — or to invest for your future, whether that might be paying for your child's college education, or having more money to set aside for your retirement.

To figure out what it will take to pay off your balances, here's a credit card calculator.