Credit Cards and Cars: Pay Them Off
Second in a series of blogs to help you reduce debt
In our first blog on reducing debt, we talked about consolidating and refinancing student loans. Once you’ve done that, here’s a tip to make that extra cash flow work for you – accelerate the pay-off of those credit cards.
Credit cards do often provide a sense of temporarily relief and allow individuals to purchase something now rather than wait until later. This can become a slippery slope when monthly balances go unpaid, even just once, and late fees and interest charges can accumulate quickly. Credit cards typically carry the highest interest rates for any type of debt. Pay off those with the highest interest rates first. Interest paid on personal credit cards is never deductible and will only cause greater annoyance in the future knowing that it provided no benefit you in return.
Many of us aspire to drive our dream car. If you are in debt, you may need to put that aspiration on hold for a few years. Even though interest rates are low, there are some risks involved with purchasing your dream car now. Consumer debt, including luxury vehicle purchases, often carries higher interest rates than other loans. The larger the sticker price, the larger the monthly car payment. If you are considering purchasing a new vehicle make sure to factor in closing costs, sales tax and cost of plates, if needed. Insurance rates jump a lot for new cars and personal property taxes are also much higher for new vehicles. These are hidden costs many people do not factor into their purchase decision.