We keep stressing the importance of investing, but we also need to first stress no credit card debt. Credit card rates can range from 7% up to 30%, while the average annual stock market return is 10%. With that said it doesn't make a lot of sense to take a gamble on 10% when you know you're losing 15% or more on your credit card debt. Not only will paying off your credit cards make you more financially secure but it will also help your FICA score!

So while it's important to start investing, clearing credit card debt is much more important.

If you can’t afford to pay off your credit cards there are a couple options.

1. Consolidate debt to a long term, low interest credit card. Make sure to check the APR and fine print to see what other fees they might be adding on.
2. If you own a home you can use a home equity loan to pay off debt. The rate on a home equity loan is usually much lower then a credit card.
3. The last option is to use a personal loan from a bank. However, this rate can be higher then a low interest credit card.

There are some loans that are OK to have while also investing in the stock market. Car and house loans are usually under 8%, which can work out well with the average stock market return of 10%.

Once you have cleared your credit card debt check out our article on why it’s so important to invest!
Also see more of our articles on learning to invest.

Tags:   Credit Card Debt   Learn How to Invest  

Posted on September 29, 2007 6:03 PM | Digg | del.icio.us