Credit card question

[measureman]

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.

 

[daves87rs]

Savings rule right now...period.

I have some credit card debt....and do the same- but we simply don’t know what we have in store. I just continue to bank whatever I can.

If things do improve after a while, then they could be paid off.....

 

[92saturnsl2]

I weighed the same sort of thing when my wife and I bought our new van in June, whether to use savings or finance. We opted to finance and keep money in the bank for the very same reasons you're considering, just having extra money socked away for the unforeseen. The only thing that made this make financial sense is that our APR is low enough that this choice does not cost us a lot of money. The APR at my credit union on our savings is 3.3%, so that negates much of the financing cost.

With credit cards, it makes no sense financially unless you're able to transfer a balance to a low-intro or zero APR card. If you're stuck paying 18%+ interest, you're throwing a lot of money in the toilet. In that case it makes sense to pay off the balance ASAP, then if you have an emergency, surprise car repair, whatever, then just put that charge on the credit card which would have otherwise come out of your savings.

No sense accumulating interest on high rate credit cards while holding money in the bank on the chance you might need it. Pay the cards off, then use the cards again if you absolutely have to. Getting a low interest card or intro rate would allow you to pay off that card over a period of time.

 

[MParr]

I will tell you that you can get in trouble real fast. What you are describing, is something similar to what I did. The interest is extremely high on credit cards and it’s hard to get out of debt by making the payments that you are making. You have three options. The first is to do what you suggested. The second is to get a personal loan at the bank and pay them off. The third is to file for bankruptcy. I eventually had to file for bankruptcy. I really didn’t want to but, it was my only choice. I have come through it. And after many years, I got another credit card. I pay the balance in full every month. It’s nice not having to deal with the worry of not having any money at the end of the month.

 

[CarLuver]

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.

 

[TrainingPolicy]

Personally, I don't keep a running balance on credit cards. Is there any way you could pay off the smallest one and then work on the second smallest one and do the snowball method? That way you don't have to clean house on your savings account, but you also don't have debt hanging over your head in an unknown time.

 

[spasm3]

Pay it off. Bank the money you were paying the card. Never carry a credit card balance again.

 

[gathermewool]

Pay them off. Allow yourself a balance only if things get worse for you.

A good compromise: 0% balance transfer, which will cost you 3% upfront, but will cost you nothing more for the remaining 12-18 months, if paid in full by the end of the 12-18 months term.

I was lucky enough to transfer $4k to a NFCU card with ZERO transfer fee a couple of months ago!

 

[OppositeLocK]

Credit card debt is arguably the worst debt one could possibly have. You're paying what, double digit interest to keep additional savings in your bank, which are most likely earning you negative interest if you account for inflation?

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.

Nobody who graduated from high school should be asking such a question. No offence to you. If you were in the military, they should have taught you that there as well.

What you're doing is an excellent way to build negative wealth.

 

[miden851]

if you cannot pay the balance in full each month, then you should not use CCs

 

[OppositeLocK]

if you cannot pay the balance in full each month, then you should not use CCs

Unless in times when they offer special rates and you use it as a form of free/ultra cheap financing.

Some retail cards allow you to not pay for something for 12 months, or only pay 0.99% interest, in which case it may be advantageous to delay.

 

[ollie]

if you cannot pay the balance in full each month, then you should not use CCs

How very true!! I learned long ago to not use credit cards for anything. If I can't afford paying cash I don't get it. I don't miss not having revolving credit.

Pay them off. Allow yourself a balance only if things get worse for you.

Yes, I recommend paying them off in full. Then you have them only as an emergency backup.

 

[MParr]

measurman,
I think you have your answer. Paying it off is the consensus. Then cancel your cards and shred them. You can then bank that money you’ve been forking over to the card companies.

 

[parshisa]

Pay it off, get rid of the debt and never accumulate it again

 

[Supersonic]

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

 

[mk378]

The minimum payment shouldn't be a basis for how much you pay. Strive to pay more than all new charges and interest every month so you're actually retiring some debt.

 

[spasm3]

measurman,
I think you have your answer. Paying it off is the consensus. Then cancel your cards and shred them. You can then bank that money you’ve been forking over to the card companies.

Yes. You are paying anywhere from 4.5 to 18% to keep money in savings that's earning at best 1%. Pay it off and never go back.

 

[Nick1994]

Pay them off, then use them if you don't have enough cash if you have an emergency.

Just wasting money paying all that interest. Say you have $10k in the bank and $5k in debt. If you need that full $10k for a rainy day fund, pay off the credit card and if you lose a job or something, you can start using the credit card and get the balance back to where it would be if you didn't pay it off.

 

[JeffKeryk]

Credit card debt is expensive as everyone has posted.
I would do some combination of the following:
Pay off or down the one with the highest interest.
See if you can consolidate with a lower rate.
Call the card company and ask for a reduction in rate.
Can you sell something and put the $$ on your debt?

The goal is to minimize (eliminate) your cost of credit.
Credit is not evil; it is a tool. Tools can make the job easier or can hurt you.
Good luck!

 

[aquariuscsm]

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.

^^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.