Fragging My CC Debt
It feels good not having any Credit Card debt. At the suggestion of one friend and the confirmation of two others I realized it was a Good Thing to pull from my impending disaster savings fund enough to totally pay off my only credit card. The rational? A simple, fun math exercise that I made up.
I have some amount of money, call it x, sitting in my savings account with an interest rate of 5.05%. I have some amount of money, call it y, sitting on my credit card with an interest rate of 6.99%. How much money must be in my savings account in order for me to break even?
This problem is easy once you realize the following:
0.0505x - 0.0699y = 0 :. x = 1.38y
So that means if you have a credit card debt of say $1000, in order to break even every month interest wise, you would need approximately $1380 in your savings account. Why not just pull a thousand bucks out of the savings account, pay the debt, and make 5.05% off the remaining $380? You would gain $19 instead of only breaking even.
Math is awesome.
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August 15th, 2007 - 22:19
And that’s only if you don’t count compound interest
.
August 15th, 2007 - 22:21
Yeah, compound interest would make the problem much more difficult that I would be willing to work out. This simple example was more than enough to convince me.
August 17th, 2007 - 00:44
huh?
yeah i figured that out last night before i went to bed. pure physics.