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I am looking for some help in deciding what I should do.
I have an Acorns savings account (the one that puts your change into a fund automatically). Over the course of a year, I have saved about $900 in this account.
I have approximately $13,000 in credit card/car debt which I have been chipping away at. My goal is to have this all paid off by May. I have been putting in extra hours at work and plan to use my tax refund to fast forward and hopefully be out of debt sooner then May.
I know it makes financial sense to withdraw this acorn money and put it towards a CC with high interest. But I really don't want to see my savings money go away, kind of like a feel good feeling to know I have something in savings. I don't know what kind of tax implications will arise if I withdraw from Acorn. I make approx $53,000/year.
I am not sure if the savings cost will really be THAT substancial since I am on course for paying everything off by May.
The one CC I could pay off with the acorns savings has an APR of 24.9%. Over the course of the past year, I have made about $45 on my acorns account.
Any advise?
Thank you!!
''
If this is your only savings, I wouldn't touch it. Just keep plugging away and get everything paid off by May
@gingerhead wrote:I am looking for some help in deciding what I should do.
I have an Acorns savings account (the one that puts your change into a fund automatically). Over the course of a year, I have saved about $900 in this account.
I have approximately $13,000 in credit card/car debt which I have been chipping away at. My goal is to have this all paid off by May. I have been putting in extra hours at work and plan to use my tax refund to fast forward and hopefully be out of debt sooner then May.
I know it makes financial sense to withdraw this acorn money and put it towards a CC with high interest. But I really don't want to see my savings money go away, kind of like a feel good feeling to know I have something in savings. I don't know what kind of tax implications will arise if I withdraw from Acorn. I make approx $53,000/year.
I am not sure if the savings cost will really be THAT substancial since I am on course for paying everything off by May.
The one CC I could pay off with the acorns savings has an APR of 24.9%. Over the course of the past year, I have made about $45 on my acorns account.
Any advise?
Thank you!!
''
I agree with steelers; having some emergency savings is a neccesary part of a sound financial strategy. You're definitely not making more than you're losing to interest, but having a cushion changes your entire financial outlook in the long term. Once you're up to $1k in total savings, focus on eliminating the high interest debt. After you've cleared the debt, consider keeping 3-6 months of cushion in cash or very stable investments.
Regarding tax implications, you only pay taxes on gains that are 'realized' (sold positions.) In this case, your gains are short term (under 1 year) and only $45. You'll pay your standard tax rate (likely ~25% in total) on $45 if you realize the gain. If you hold longer, you'll pay either 0% or 15% depending on your total earnings in the year.
Side note: you should also adjust your tax withholding so you have no refund. It is silly to let the federal government hold your money at 0% interest while you pay 25% interest to borrow. Plenty of calculators online can help you make an adjustment, put the money in your pocket now, and let you dig out a little sooner.
How are the acorns fees avoided with Robinhood? Recenlty just opened an acorns account myself to build up some savings.