Certain types of debt are better than others. Worst, by far, is credit card debt: the interest you pay might be as high as 20 percent, aftertax, because interest on credit card debt is nondeductible. Thus, if you have credit card debt you should pay more than the required minimum to reduce what you owe. When you pay down a credit card balance with an 18 percent interest rate, for example, you’re effectively earning 18 percent per year, aftertax, risk-free.
Look at your credit card statements to see the effective interest rates. Pay the minimum on your low-rate cards while you pay off the high-rate cards as quickly as possible. Then pay off the low-rate cards. To help you do this, check your mail for offers of low initial rates on credit cards. You can roll to low-rate cards to reduce the interest charges while you pay off the balances.
