Credit card question

[Dave9]

Considering the amount of money, and that you should definitely keep a cash cushion in the bank, I'd pay off half of it and continue paying as much as you can in monthly payments, and stop charging more than you can pay off each month.

^^This times a million!! There's no way in hell a grown adult should be forced to take PE,Drama,Theatre,etc. Honestly,it's a bad joke imo.

?? Huh? What grown adult is forced to do these things? Even at college age of early 20's, that's still a kid in my book.

I don't see the need though, I mean who doesn't understand that it's a problem to spend more than you earn or a loss to pay interest on an accumulating debt vs gaining interest on an investment? If someone can't do math at least well enough to realize that, I guess they should keep failing at high school and would be taking classes as an adult still, but should have the easy ones like PE, drama, theatre out of the way and be taking math again and again.

 

[Wolf359]

It's funny how about 1/3 of the people out there are known as deadbeats because they pay off their full balance each month so the credit card companies don't make much money from them. I've been doing that for decades. In the past, every once in a while I'd forget to make a payment on time and then you'd call them up and they would waive the penalties and interest, but now you can automatically set it up to pay your balance in full each month so I haven't done that in years also. I use the Fidelity card too, get 2% back on everything.

But it's interesting that the consensus is that it should be paid off when 2/3s of the population can't do it.

You don't really need the cash cushion, if you need it, you do a cash advance on the credit card. Carrying a balance means that whatever you charge is costing you 2-3 times the amount if you just pay the minimum each month. On the other hand, Warren Buffet talks about the 300k haircut which is what the cost of the haircut could grow to eventually if you invest the money instead. You'd have to have pretty high interest rate to hit 300k though. That's why the rich get richer and the poor get poorer.

The real fallacy is thinking that these are uncertain times. The times are always uncertain. When were they ever certain?

 

[csandste]

I paid off all credit card debt close to thirty years ago. I have three cards, one of which I use a couple of times a year. The other two are used for all purchases but automatically paid in full monthly. All cards pay 1-5%. I auto pay in case I stroke out everything is automatically paid including my utilities. Found that out when my girlfriend was hospitalized for a couple of months and her kids and I had trouble getting into her accounts. I own my home and two rental properties with no mortgage and pay cash for cars. Living debt free feels wonderful. Pay off those cards.

 

[fsdork]

i would pay if all off. by paying it off you are not paying the interest on them. leave it in the bank and you get almost no interest now. you can always fall back on the cards in an emergency if you need to. just make sure you don't pay them off and start rolling them up again.

This has been said by a few people in different ways. Just adding another vote for this being the best course of action. I have always kept a line of credit available and more or less at a $0 balance. That allows me to pay down other debt more aggressively without worrying about keeping a large cushion of cash in the bank. If my furnace/hot water tank/roof/etc. packs it in tomorrow, I can use the line of credit to get it replaced.

 

[Lubener]

I usually pay double or more then minimum payment each month.
If I payed off all my cards in one shot it would take half of my savings.
In these uncertain times it's nice to have a little money in the bank.
Does it make sense to do this?
We are talking about less then $10K.

Pay it off. The interest is a killer and you won't gain any ground just paying the minimum.

If you can't pay it off at the end of the month, it's time to cut expenses.

 

[Skippy722]

I agree with paying it off if you’re able to. Then take those monthly payments and put them back into your savings.

 

[Dave Hess]

I usually pay double or more then minimum payment each month.
If I payed off all my cards in one shot it would take half of my savings.
In these uncertain times it's nice to have a little money in the bank.
Does it make sense to do this?
We are talking about less then $10K.

Pay off half your CC balance and the rest cash in the bank.

 

[ABN_CBT_ENGR]

I agree with the masses here- pay it off as fast as possible because its wasted money ( and this comes from a road warrior that lives on an AMEX- but most of it gets billed)

However, it needs to be paid off on a structured plan where the risk is assessed against your situation so you don't make a bad situation worse or have an unacceptable level of risk or potential. Thus "as fast as possible"- not necessarily "right this second".

 

[alarmguy]

I usually pay double or more then minimum payment each month.
If I payed off all my cards in one shot it would take half of my savings.
In these uncertain times it's nice to have a little money in the bank.
Does it make sense to do this?
We are talking about less then $10K.

No, it doesnt make sense. Pay it off.
Its discipline, you spent money you should not have and pay interest rates that used to be against the law to charge people, only organized crime was able too.
Moving forward, dont buy things that require you to borrow money from other people, much like the kid in school who never had lunch money.
By paying it off, you are getting rid of the insanity of debt, teaching yourself to save money before spending, not spending before saving.

If an emergency does come up before you save up money in your bank, you could always use the credit card if it is an emergency. But not paying off your debt before saving money is almost like an excuse to yourself for not getting out of debt.

 

[Astro14]

Paying “double or more “than” the minimum” is a great way to provide profits for your bank, while keeping you permanently in debt.

You need/want a cushion. Totally agree. Good planning.

However, a paid off credit card is a cushion, until you can rebuild the cash savings balance.

Let’s take $10,000 as your card balance and savings account balance. Average credit card interest is 18%. You’re paying $150/month in interest on the card. That’s a lot. You’re making $8/month in interest on your savings. That’s nothing.

By paying off your card with the savings, you’re going to improve your cash flow by $150/month. Put that money that you don’t spend on interest back in savings. It’ll take a few years to regain the balance (all other factors being equal), but you’re saving money over your present situation. $1,800/year. Real money.

Put another way, I would love to get an 18% return on my investment dollars. Paying off the card is a guaranteed 18% return, which is a great rate of return.

 

[supton]

Another way would be do it over 2 or 3 payments.

I like this idea. If concerned about the future, then just do it over a very short period of time.

Have you run the math to figure out what the finance charge is per month? That might provide the data as to how fast you want to pay off.

 

[thastinger]

Well, paying them off only works if you don't run them back up. I think you need to have an honest discussion with yourself on whether you can do that. If I had only 20K saved up, I sure as chit wouldn't burn up half of it to pay off unsecured debt.

 

[supton]

Sometimes it pisses me off how we force people going through the education system to take second language classes, liberal arts, and other soft skills, but we don't require them to have a solid foundation of personal finance.

I remember hating some of the classes I had to take. Most of 'em I've forgotten now. Wild guess but if I had been forced to take a class on money... it'd have been forgotten right after passing the last test. IOW requiring a class on it won't necessarily cause people to act better. [FWIW I'm not against a class on money--if anything, multiple classes would be good, like every other year, hit on the subject. No way it'd happen: not when most states use a state lottery to help raise money for schools. Not when most people won't be seeing good role models, either in their friends lives or even in their parent's lives.]

Can't get by in life without soft skills. Conflict resolution? Dealing with people from different backgrounds? Having to do things that you don't like doing, simply because you are required to? Having to learn a skill outside of your natural skillset? Life is full of mushy things that seem to defy simple laws to govern them.

 

[gathermewool]

It's funny how about 1/3 of the people out there are known as deadbeats because they pay off their full balance each month so the credit card companies don't make much money from them. I've been doing that for decades. In the past, every once in a while I'd forget to make a payment on time and then you'd call them up and they would waive the penalties and interest, but now you can automatically set it up to pay your balance in full each month so I haven't done that in years also. I use the Fidelity card too, get 2% back on everything.

But it's interesting that the consensus is that it should be paid off when 2/3s of the population can't do it.

You don't really need the cash cushion, if you need it, you do a cash advance on the credit card. Carrying a balance means that whatever you charge is costing you 2-3 times the amount if you just pay the minimum each month. On the other hand, Warren Buffet talks about the 300k haircut which is what the cost of the haircut could grow to eventually if you invest the money instead. You'd have to have pretty high interest rate to hit 300k though. That's why the rich get richer and the poor get poorer.

The real fallacy is thinking that these are uncertain times. The times are always uncertain. When were they ever certain?

Just to clarify, only the STATEMENT BALANCE is required to be pie in full to avoid interest. It’s not necessary to pay the full balance. This

+1 on the rest of what you said.

 

[gathermewool]

I paid off all credit card debt close to thirty years ago. I have three cards, one of which I use a couple of times a year. The other two are used for all purchases but automatically paid in full monthly. All cards pay 1-5%. I auto pay in case I stroke out everything is automatically paid including my utilities. Found that out when my girlfriend was hospitalized for a couple of months and her kids and I had trouble getting into her accounts. I own my home and two rental properties with no mortgage and pay cash for cars. Living debt free feels wonderful. Pay off those cards.

Use something like LastPass. That way your significant other can sign in to ALL shared accounts, if necessary. BITOG is in there, too, so my wife can troll you guys when I die. She has her directions.

 

[csandste]

Use something like LastPass. That way your significant other can sign in to ALL shared accounts, if necessary. BITOG is in there, too, so my wife can troll you guys when I die. She has her directions.

I do have master passwords stored. I'm widowed and frankly my kids and their spouses are not exactly good with money despite my preaching.

 

[Wylie6G72]

Pay it off....you're wasting money on interest. If you get into a jam, then use the card the same as you would've used the cash. Additionally, if your card isn't a cash-back card, ditch it and get one. I redeem my cash rewards 3 days before the statement cut date, then pay off the balance the next day. My statements reflect a $0 balance, and I pay no interest. This causes them to report that I have a $0 balance to the credit reporting agencies, which in turn raises my FICO score because they perceive that I carry no revolving debt, and have a low credit utilization ratio. This method allowed me to re-finance my house at 2.375%. This is just one reason to stop carrying a credit card balance. Do it.

 

[cb_13]

Most of the points other users here are making fall right in line with what you will read in it but I recommend Dave Ramsey's Total Money Makeover. His technique is proven and can be slightly tweaked for different situations.

 

[jstert]

savings accounts earn 2% at most, credit cards cost 15% at least these days. bite the bullet, pay off the credit cards, lock them away except for just one from a credit union, use that one for true emergencies only, pay cash, if you cannot use or afford to pay cash don’t buy it, and thereby remove yourself from debt slavery.

where are we as an economy when our “credit score,” i.e. our ability to indenture ourselves with more debt, is esteemed? the only “credit” in credit score actually belongs to the lender, not to the debt slave.

 

[SevenBizzos]

I usually pay double or more then minimum payment each month.
If I payed off all my cards in one shot it would take half of my savings.
In these uncertain times it's nice to have a little money in the bank.
Does it make sense to do this?
We are talking about less then $10K.

I would pay it off and leave it open for a couple of months (if you plan on keeping it) as you dump as much money back into your savings account.