I Say:

Of course the "power of compounding" works against you the other way with debt like credit cards. You really have to plug in the numbers into some financial planning program or web page to see if it is a good financial decision. Accounting for taxes, you have to consider whether your IRA can do better than 9.9%.

You're absolutely right. That is what is so horrible about the way that credit card debt builds up. And nowadays some cards even average finance charges over more than a month so that it's cheap to run it up and expensive to pay it off.

The other point I was trying to make is that you can only put $2000 a year into the IRA. If you withdraw money, you can't get it back in, except at $2000 a year. So you miss out on all those years of compounding in your IRA. That doesn't mean in some situations that it doesn't STILL make sense, but please be careful to include the future impact in the analysis. A financial analysis of taxes&penalties vs. finance charges doesn't tell the whole story. Most people, myself included, don't check out all possibilities first.