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Question: I owe over $10,000 on a single credit card, but I have a fixed interest rate of 3.99% for the life of the balance as long as don’t make any new charges. Other than this card, I don’t carry any other credit card debt. I have over $100,000 available on my other credit cards. I pay about $300 more than the minimum payment each month, and will have the card paid off by August 2011. Should I pay this card off faster, or should I focus on other things like saving for an emergency fund. I only $4,000 in the bank for an emergency. Chris, Tallahassee, FL

Answer: My general advice is to get as aggressive as possible about paying down the credit card debt.

For one thing, paying down the credit card debt is the equivalent of earning 3.99% on your safe savings. Hard as it is to believe that’s a good return in an investment environment where the average interest rate on a 1-year CD is 1.34% and the 1-year Treasury note yields 0.30%. (Even the 10-year Treasury note is at a mere 2.9%.)

For another, you automatically boost your savings every time you pay down debt. You’ll end up with a stronger household balance sheet. One savings trick is to keep making the same payments toward getting rid of your debt once it’s extinguished. But the money goes into your savings accounts. It will grow fast.

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