Debt Reduction as a Good Investment

It seems like investing has become treacherous over the past few years.  Real estate prices are down with no real signs of strength.  The stock market is up and then down and seems to be moving without any real direction.  Do you really have the nerve to be investing in gold at peak prices?  What seems like a decent investment today could easily drop 25% in just a short period of time.  It may be that debt reduction is actually the most prudent investment in these troubled times.

The average American household with credit card debt has close to $15,000 on those credit cards.  With the average annual interest rate on credit cards of 16.79%, consumers are paying more than $200 in just interest charges.  It would seem to me that one of the best investments around would be to reduce the debt on those credit cards.

Where else can you get a guaranteed annual return of over 16% without any risk whatsoever of loss? There is simply no way that you can go wrong by paying off credit card debt. The stock market has not gained that much this year. Real estate hasn't done well over the past few years either. Savings accounts or certificates of deposit offer no substantial return.

Consider the impact that a $500 "investment" against your credit card debt would have. That first month alone the passive income from paying off that portion of the average debt would amount to almost $7. That may not seem like a lot, but it is more than what I earned for my first month on HubPages. And that is not simply a one time payment either. That $7 will come to you each and every month and will be increasing over time.

It would only take 6 years to double that $500 investment and make it back through saved interest charges. In 30 years, $500 doubling 5 times will ultimately mean $16,000 in your pocket. And the best part is that it is all tax-free. There is no tax on the passive income that you save through lower interest charges because of debt reduction.

So, if you are looking to invest some money and aren't exactly sure what you should do, think about investing in a sure thing.  Make an extra payment or two on a credit card, enjoy the extra monthly passive income and know that you won't likely get a better risk-free, tax-free return on your investment any other place.