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Regular Contributor
soliloquy
Posts: 144
Registered: ‎01-29-2010

Silly Question: Pay off 0% interest credit card or put money in savings?

[ Edited ]

I have a store card that has the promotional 0% financing for 24 months from when we purchased our furniture. Our monthly payment is less than $100.00 and the balance is only about $2000.00 at this point. We have been making payments since last May.

 

It's early and so maybe that's why I can't figure out this in my head but would it be better to pay off the credit card even though it has 0% interest or put the extra money in sasvings instead of paying off the card?

 

What are your thoughts?

 

I have 8 tradelines and 2 have a balance. This account and a Visa card.

 

I know this is bordering on OCD so thanks for your help in advance. :smileyhappy:

Super Contributor
DI
Posts: 5,767
Registered: ‎01-28-2008

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

If one can afford to not carry debt then don't. 

Valued Contributor
thrasher865
Posts: 1,163
Registered: ‎05-21-2008

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

With the ridiculously low interest rates right now, I'd just pay off the card.

 

If you had a savings account with like a 5% interest rate, then I would definitely consider this.  In fact, I and many others have done similar things in the past.  You put your money where it can work the hardest for you.

 

i.e.  two TVs ago, I had the cash to pay for the TV, but instead got the 24 months 0% interest and bought an 18 month CD, then paid off the TV when the CD matured.


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Established Contributor
cdtotten
Posts: 951
Registered: ‎05-27-2009

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

If interest rates were higher than 2% or so, I'd advise you differently, but because your money really can't make that much right now, I would recomend just paying off the debt. The worst thing that can happen is that you forget to make that last payment or miss a payment and that accrued interest comes back to bite you.

 

Another positive is even if you have the money now, if you draw it out something could happen, you spend that money and then you have nothing to pay with. You'll feel better with it paid off and take the money you would have paid and put that in savings from now on.


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Valued Contributor
Uborrow-Upay
Posts: 2,710
Registered: ‎10-16-2008

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

I wouldn't worry about the FICO score aspect, I'd be more concerned about screwing something up.  See cdtotten's post, just above this one. 

 

"The worst thing that can happen is that you forget to make that last payment or miss a payment and that accrued interest comes back to bite you."

 

That's how they get you.  Just don't let 'em.

 

IMO, put the money in savings, earmarked for only that payment. You're not going to get much of anything in interest earnings, so balance that against the fear factor of messing up somehow and getting hit with accrued interest on 2 year old furniture.

 

Maybe an easy choice, but definitely a personal one.  What's your comfort zone?  Only you know.

 

You'll figure it out.  :smileyhappy:

 

 

 

 

 


Regular Contributor
soliloquy
Posts: 144
Registered: ‎01-29-2010

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

Good point, although I have signed up for auto-payments so they take the money out of my account every month and it will be paid off prior to the 24 months according to the schedule. Am I still at risk for that accrued interest thing if the account is on auto pay?

Super Contributor
DI
Posts: 5,767
Registered: ‎01-28-2008

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

 
Valued Contributor
Uborrow-Upay
Posts: 2,710
Registered: ‎10-16-2008

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

 


soliloquy wrote:

Good point, although I have signed up for auto-payments so they take the money out of my account every month and it will be paid off prior to the 24 months according to the schedule. Am I still at risk for that accrued interest thing if the account is on auto pay?


 

If it was me, I'd put one additional payment on there in advance of the due date, just in case of a glitch not under your control.  In other words, make sure that final auto-pay  clears that debt one month early.

 

(I'm paranoid of auto-pays, BTW...in case you couldn't tell.)  :smileyhappy:

Moderator Emeritus
beamMEup
Posts: 4,473
Registered: ‎12-31-2008

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

If it were me (and it's not) I would pay the thing off.

 

Things happen.  Auto payments flub.  Onling banking screws up.  Balances report incorrectly.  I'm all for reducing to zero the risk with deals like this.  Any failure to pay in full by due date brings the interest rate into play from day one.  Doing the math on what that interest would be with pencil and coming up with a real life number on this is pretty motivating.  I don't know what your original purchase price is, or what your interest rate becomes at the end of 24 months; but as an example if your purchase was $3,000 and it defaults to 22% interest at default, the interest would come in at about $650 in 24 months time.

 

As one of my friends says, "Hope for the best.  Plan for the worst."  The risk is too expensive.  Payment in full reduces the risk to zero.

 

Also (if my math is right - and that's a huge if):

if your balance is $2,000; you make $100 payments per month; and you're 12 months into a 24 month 0% deal

you will run out of 24 months before you're paid down to zero.

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MarineVietVet
Posts: 14,084
Registered: ‎07-14-2009

Re: Silly Question: Pay off 0% interest credit card or put money in savings?

I think I'm in the minority sometimes but my approach is to always pay every debt off as fast as possible with no other consideration except to make sure doing so doesn't deplete any savings you might have.

 

IMO nothing is more important than being debt free.

 

 

 

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