Tip of the Day: Why Waste Money
We aren’t talking about how much you spend on junk food, although banking that money wouldn’t hurt—either your waistline or your wallet. Rather, we are thinking about the needless, non-deductible debt you rack up each month.
Let’s take a simple example. Suppose we say you carry a $2,000 balance on your credit cards and that the bank or store that gave you the card is charging you 17% a year for the privilege of owing them money. That means you are shelling out $340 a year for the interest alone.
If you stuck the $2,000 in something as basic as a savings account, which historically has paid 3.8% interest, you would make $74 a year.
The difference in interest alone between having $2,000 in the bank and owing the credit card company $2,000 is $414 a year. (The $340 you don’t have to pay in interest, plus the $74 you earn by having that $2,000 in the bank.)