Thanks to an inheritance, Cheap Geek had the ability to pay off his credit card. He was, however, reluctant to use his financial windfall, wanting to rough it his own. Every month, he’d squirrel away a portion of his earnings and direct that towards his card. Continuing at the rate that he was going, he’d be able to pay everything off within eight to nine months.
Clearing debt on one’s own terms is an admirable aspiration. Unfortunately with a 13% p.a. credit card and a 5.5% p.a. savings account, it wasn’t a thrifty one. By not paying off the credit card tout de suite with his inheritance, Cheap Geek was paying an extra 7.5% p.a. of whatever was outstanding*. Each month he dithered, he was losing up to $130 in interest. Continue reading