Is your CD costing you money?

Glass piggy bank with coins

Your first answer might be, "No, it's making me money!"

And that might be true, but only if you are not carrying a balance on your credit cards.

If you have a balance on your credit card and have money to invest, one of the best investments you can make is to pay off your credit card.

Interest rates are on the rise, which is good if you have a CD, but bad if you have a variable-rate credit card, which most are.

A quick check on rates for a nine-month CD revealed one with an annual percentage yield of 5.5% so if you put $2,500 into that CD, it would be worth $2,602 at the end of nine months.

But what about your credit card?

If you owe $2,500 and your credit card company is charging you 14.5% in interest (the national average), you're going to be paying about $27.50 a month in finance charges. If you don't add any new charges that amount would go down a bit, depending on how much you pay.

But for the sake of example, let's just say that you are paying $27.50 in interest every month. In nine months that would add up to $247. That's almost two-and-a-half times what you would earn on your CD. And we're assuming a 14.5% rate.

A lot people pay in the 20 percent range, which would jack up your interest rate payment to about $41 a month or $375 for nine months. And if you got stuck with a universal default rate, which you could get if you make a late payment on any of your bills, you could be paying 27 percent or more, which would be well above $55 a month.

Those credit cards are costing you big time!

If you can, pay off your credit card bill now. You won't have that money anymore, but neither will you be paying out hundreds of dollars a year in interest to your credit card issuer.

And then use some discipline. Limit your new charges so that you will not carry a balance again.

Once your card is paid off, you can stash away the money you would have used to make card payments, and when you reach your goal you can buy your CD -- one that will actually make you money.

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