Top Credit Card Pitfalls to Avoid

By Suze Orman

Forget the stock market! Your best investment is to lower your credit card interest rate and pay off the balance

It sure isn't easy making a buck these days. The stock market isn't delivering returns to brag about. And in today's tight job market I don't see too many bosses who look like they're about to back up the armored truck and start handing out raises.

But I have a surefire way for many of you to make a guaranteed 18 percent. If you are one of the millions of Americans who carry a balance on your credit card, you can give yourself a great investment return by paying off that balance. Whatever interest rate you are paying is what your "gain" will be by shrinking your balance to zero. If you pay 18 percent, that's an 18 percent return for getting your balance paid off. If you pay 10 percent, you will give yourself a risk-free 10 percent return. If you know a stock that can produce that, please, send me an email ASAP.

You know me, I love a good example, so here goes: The average credit card balance these days is pushing $8,000 and the typical interest rate is about 18 percent, with many folks paying even more. Can we do some simple math here, my friends? An 18 percent interest rate on an $8,000 balance is $1,440 a year.

How can you afford to throw away $1,440 a year? That is beyond nuts.

If you need more convincing, how about if instead of paying $1,440 a year, you had $1,440 to invest every year for the next 20 years and you earned an average return of 8 percent a year. Care to guess what that would be worth in 20 years?

A. $35,543
B. $47,245
C. $71,169

It's C. You invested $28,800 over the 20 years, and your money grew to $71,169. There is absolutely no way you can argue with me when you see those numbers. Get your credit card debt under control immediately! It's not nearly as hard as you think.
Gather Your Bargaining ChipsOkay, if you have a credit card balance and you are paying a high interest rate, your first job is to get that interest rate down. more...

Article also contains:

Show Zero Interest
Transfer Notes
Your Balancing Act

A Dozen Credit Card DON'TS to Stay Far Away FromHere are twelve traps that many credit card holders fall into. more...Suze Orman has been called “a force in the world of personal finance” and a “one-woman financial advice powerhouse” by USA Today. She is the author of four consecutive New York Times bestsellers, including The Road to Wealth. Suze Orman, a Certified Financial Planner Professional®, directed the Suze Orman Financial Group from 1987-1997, served as Vice President of Investments for Prudential Bache Securities from 1983-87, and from 1980-83, was an Account Executive at Merrill Lynch.

Watch Suze every Saturday night on CNBC. Check www.suzeorman.com for TV listings

Source: NEWS.YAHOO