Your age doesn't matter: You can get at that money without penalty or even income taxes. Both taxes and the 10% penalty apply to the earnings on your contributions, though, until your odometer hits 59 1/2 and you've had the money socked away for five years (with a few exceptions, below).
The term âcompound interestâ means that any interest charges are added to the principal (which is the amount you originally borrowed) so that your debt grows exponentially. If you have a $100 debt and it accrues 10% interest every month, then the first month you will be charged ten dollars (100 x 0.10).With compound interest, that ten dollars is added to your original debt, so now you have $110 of debt.f you charge the $200 to your credit card, then the amount will show up on your monthly credit card bill and you will have a 30 day grace period to pay it off, after which youâll begin to accrue interest on it.
Letâs backtrack to the example of $7,000 at 20 percent APR. If Kyle doesnât use a balance transfer heâll pay $2,507 in interest alone to Discover. Instead, Kyle decides to do a balance transfer to Citi Simplicity at a 0 percent APR for a 3 percent fee.Including the fee, it would only cost Kyle $555 to pay off his $7,000 in interest. Even with a fee, Kyle would save almost $2,000 by doing a balance transfer.ere's an example to show how a balance transfer could save you money: If Kyle holds $7,000 on his Discover credit card at a 20 percent interest rate, and pays $250 a month toward the debt, it will take him 39 months and cost $2,507 in interest to pay it off, according to MagnifyMoneyâs calculator.