Pay off this debt, or put the money in savings? I really need your guys' opinions.

[pipeguy]

Average CD or promotional saving rate is .5 to 1.1 percent earned, average credit card APR is 18 to 25% paid OUT.

Of course 0% promotions on cards are great, but they end so I don't think there is any question - Pay the cards off IMO.

[Anonymous]

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@Anonymous wrote:

Pay off debt when you can, for sure.

I'd also like to kindly recommend a bit less of an engagement ring.  I'm sure you want to get her the world but that is a damn big ring based on your salary.

My ring advice is the beauty of hindsight because I have been there, done that, and don't even have a t-shirt to show for it.

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+1 to this and others advising the ring is too big.  Instead of being the beautiful reminder of your commitment to eachother, don't let it become a forever reminder of a big financial mistake.

Our first credit debt was for a wedding ring set.  It was the beginning of a lot of bad credit mistakes while we tried to live beyond our means. Now, 22 years later, we have the means but I wear a plain gold band.  The babies come and the big pointy rocks tend to accidentally scratch the baby.

[XxRaVeNxX1]

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@Anonymous wrote:

I did not see this addressed so I am going to take the liberty of doing so:

On a 30K salary with 7K of existing credit card debt, I would not be buying a house for a couple of reasons:

1. With the current DTI your terms for the home loan will not be favorable (Higher rates, points, etc increasing cost of ownership)

2. You have NO room for any adverse financial events

3. You will sink much further into debt (house poor)

Before you get the house you must set a goal of having the entire 7K paid off. If you do not you will never get out of debt.

The above assumes that your income does not significantly increase prior to purchasing the home

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Is this accurate information? Is it because it is credit card debt and not a loan? What if he had had a car loan and he owed 7k? Would the advice still stand?

[Bman70]

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@XxRaVeNxX1 wrote:

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@Anonymous wrote:

I did not see this addressed so I am going to take the liberty of doing so:

On a 30K salary with 7K of existing credit card debt, I would not be buying a house for a couple of reasons:

1. With the current DTI your terms for the home loan will not be favorable (Higher rates, points, etc increasing cost of ownership)

2. You have NO room for any adverse financial events

3. You will sink much further into debt (house poor)

Before you get the house you must set a goal of having the entire 7K paid off. If you do not you will never get out of debt.

The above assumes that your income does not significantly increase prior to purchasing the home

---

Is this accurate information? Is it because it is credit card debt and not a loan? What if he had had a car loan and he owed 7k? Would the advice still stand?

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Not necessarily accurate or applicable to everyone. DTI is a matter of your monthly debt payments (or future payments) as a percentage of your monthly income. So even with $50 per month on each of the 3 cards, OP would only have a DTI of 6%, which is super low. 

Additionally, often mortgage payments are significantly lower than rent. So by having a mortgage you could end up paying off debt faster than renting. 

[SouthJamaica]

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@xgac12x wrote:

So basically I have about 6800 roughly of CC debt that I am looking to pay down. I am in the process of purchasing an engagement ring, but I'm not sure whether or not I should send the jeweler money towards the ring or pay off the cards, or put money into my savings. The jeweler is local, known them for years, just making payments of at least $5 every month to keep the stuff on layaway. The ring is about $8500 total. I am looking to have that ring in about 2-3 years at the maximum. So anyways, I have roughly 1800 on barclays, 0% APR offer until 3/31/17, 2500 with citi until 9/1/17, and 2500 with discover expiring 5/23/17. I have about $250-$300 a month that I am looking to either put in savings, or pay my credit cards off, I am just not sure on which one to do. I am actually looking to purchase a house too as a first time home buyer, so also keep that in mind please. I make about 32k a year. I just want your guys best advice on what I should do, the cards in my signature are up to date. I really would like to pay down my CC's and then purchase the ring on a promotional rate, and pay that off like $500 a month after I pay my credit card debt off. What would you guys do? I am not looking to apply for anything new, I can do balance transfers though, just really would like your advice on what my best route should be. Should I save, or pay down the debt and how.

Thank you guys.

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IMHO pay off your debt

[xgac12x]

That is the exact reason why I am looking to get a mortgage. I am spending almost $1,000 a month on rent - when I am looking at a very modest house where the mortgage would be roughly $600 or so a month. I would reallocate that extra cash to debt of course.

[xgac12x]

Also, would go from having a one bedroom apartment - to a 3 bed 2 bath with a gigantic bard yard - perfect for the pups. Definitely having a house is favorable

[Bman70]

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@xgac12x wrote:
That is the exact reason why I am looking to get a mortgage. I am spending almost $1,000 a month on rent - when I am looking at a very modest house where the mortgage would be roughly $600 or so a month. I would reallocate that extra cash to debt of course.

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Yep, renting is sometimes called "paying off your landlord's debt." They typically charge $300-$600 above what their mortgage payment is on the property. 

Still, I don't see paying for a $9k ring in 2 years - given that it would take around two years to pay off the current CC debt (assuming some $300 a month toward it). Were you expecting to have more than $300 monthly before then? 

[xgac12x]

Well yes that too - I havent graduated with my bachelors yet but I will be graduating soon - also getting a raise at work. I would really like to get a house for the mortgage. Knowing im spending that much every month for rent makes me anxious lol

[Anonymous]

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@XxRaVeNxX1 wrote:

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@Anonymous wrote:

I did not see this addressed so I am going to take the liberty of doing so:

On a 30K salary with 7K of existing credit card debt, I would not be buying a house for a couple of reasons:

1. With the current DTI your terms for the home loan will not be favorable (Higher rates, points, etc increasing cost of ownership)

2. You have NO room for any adverse financial events

3. You will sink much further into debt (house poor)

Before you get the house you must set a goal of having the entire 7K paid off. If you do not you will never get out of debt.

The above assumes that your income does not significantly increase prior to purchasing the home

---

Is this accurate information? Is it because it is credit card debt and not a loan? What if he had had a car loan and he owed 7k? Would the advice still stand?

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All depends on the financials....

In my experience 7K of credit card debt is different that a 7K car note, especially when car notes are <5%. With the house payment, utilities, CC payments, etc, the CC debt will never go down because people tend to pay minimum or simply can't pay more....Then bam, something happens, fridge dies, furnace dies, CC debt goes up. Before you know it, you have 50% of your income in CC debt. Car can be sold if in a bind, only thing you can do with CC debt is BK.

Sit back and think about it a bit. CC debt when looking at your disposable income over 30% is a bad pace to be in when you have responsibilities. It is a heavy weight to carry.

So i stand by my assessment from experience having been there. There is a reson scoring like 10% or less. Over that and CC debt really brings down ones ability to handle the unexpected and makes it easy to dig a hole you cannot get out of. 

Ring, too much, 7K credit card debt, too much, on that income. I would argue that