The Value of Interest

Interest can be a good thing. No, I'm not talking about the interest you earn on your investments or in your savings account. That's a great kind of interest, of course, and you hear everywhere about the miracle of compound interest. I'm talking about the APR on your credit cards.

I know what you're thinking: this lady is crazy! But hear me out. The interest you pay on your cards is a motivator to pay them off and move into a debt-free lifestyle. I can honestly tell you that if my cards and debts had 0% interest, I would continue paying minimum payments forever. I would most likely use the cards every day instead of paying in cash or my debit card. I would probably rely on them in an emergency and use them to fund my retirement. My (future) children would inherit my debt and need to sell my estate to pay it all off.

Now, a more likely scenario is that I would still eventually figure out the whole personal finance thing and build up wealth. But I would bet that I wouldn't do that for some time and lose years of earnings. The interest on our debts is what motivates me to pay them off. I feel sick to my stomach when I think of how much money we're paying in interest. And that keeps me aggressive at paying down the principle.

I feel so strongly about this that I turned down my parents when they offered us a low interest loan to wipe out our credit card debt so we could pay less interest overall. I told them that we needed to pay the interest. This is our penance. We did the crime, now we're doing the time. Of course, I have continually lowered our interest rates and if I could find a 0% balance transfer offer that had no fee, I would jump on it. Right now, this interest is helping us financially in the backwards manner. Soon, we'll be using interest to grow our money!