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Should I save or pay off debt?

Valued Member

Should I save or pay off debt?

I've been debating for months what to do with my financial life. I have been saving and paying off my cards little by little. I managed to save $1000 but looking over my credit card statements, i feel like saving is actually hurting me because of the high interest rates I have on my cards.

 

For example i have a cap one card $3000 limit and its maxed out. I've been putting 50$ but the interest charge on purchases is coming out to 58$! 

 

I also have another cap one, $400 with $500 credit limit.

 

Should I just pay off the cards and once i'm debt free continue to save?

Message 1 of 15
14 REPLIES
Contributor

Re: Should I save or pay off debt?

I would pay off debt first because you're not really saving money with the extra you have to pay for interest... Pay off the highest Apr card then work on the other one 

 

 

Message 2 of 15
Community Leader
Super Contributor

Re: Should I save or pay off debt?

Pay of the debt first.  The interest on the maxed out card must be killing you.  One you are able to do that then you can start saving.

Message 3 of 15
Valued Contributor

Re: Should I save or pay off debt?

I also think you should pay off the debt. In the long run, that will allow you to save even more, and faster.
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Message 4 of 15
New Contributor

Re: Should I save or pay off debt?

I think you should pay off your debt as fast as you can while still saving a little in case of emergencies. If you don't have any money in reserve if something comes up you will most likely get right back into debt. I think you should get yourself on a budget and learn how to live within your means. I like and use the progragm YNAB.

 

So I would probably put $500 of what you have saved toward the debt and then look for ways to cut costs so you can pay more on your debt.


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Message 5 of 15
Established Contributor

Re: Should I save or pay off debt?


CollectPunisher wrote:

I've been debating for months what to do with my financial life. I have been saving and paying off my cards little by little. I managed to save $1000 but looking over my credit card statements, i feel like saving is actually hurting me because of the high interest rates I have on my cards.

 

For example i have a cap one card $3000 limit and its maxed out. I've been putting 50$ but the interest charge on purchases is coming out to 58$! 

 

I also have another cap one, $400 with $500 credit limit.

 

Should I just pay off the cards and once i'm debt free continue to save?


Agree with what's been said. But, what I would add is that you should keep that $1000 in your savings. If an emergency comes up, then you have some reserve funds to pay for whatever that may be without having to touch your credit cards.

 

So, stop saving for right now, pay off your cards ASAP - sell stuff, find extra employment, do what you can to pay those suckers off. Then, you can divert those paymenrs to savings after you've paid things off. 

 

Budgeting will help you give every dollar you have a job.

 

Garden Club Member since 3/9/2017
Message 6 of 15
Contributor

Re: Should I save or pay off debt?


CollectPunisher wrote:

For example i have a cap one card $3000 limit and its maxed out. I've been putting 50$ but the interest charge on purchases is coming out to 58$! 


I'm assuming you're not saying this is the case EVERY month since under this scenario you'd be in debt forever. Smiley Happy

 

Anyway, you're in a tough spot, and I've definitely been there more than once, unfortunately. Like someone else already mentioned, the problem with not having anything in savings is if you fall into hardship (ie, lose your job), then you'll very quickly find yourself back in heavy debt as you use your credit cards to live off of while looking for a new job. This happened to me, and quite frankly, it almost broke me. It's a terrible feeling.

 

Having said that though, I don't think it's any better a situation if you lose your job or get sick, and you have decent savings and heavy debt. It's really just a different side of the same coin. At least if you pay more heavily on your debt, the obvious and immediate upside is that you save (potentially a ton) on interest.



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Message 7 of 15
Contributor

Re: Should I save or pay off debt?

the interest is just creating more debt... I would pay off as much as you can, then save.

Message 8 of 15
Contributor

Re: Should I save or pay off debt?

I agree. Take the money your normally add to your savings account and put it towards your highest APR along with usual payment. You won't 'feel' the change but the principle will decrease.

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Live minimally for a few months.
You'll get there .
Message 9 of 15
Valued Contributor

Re: Should I save or pay off debt?

If you have a relatively stable job, pay down the debt first before saving, starting with higher interest rate cards since the money you are saving and earning a low interest rate , if any, is eaten away with the high interest rate debt. When you think about it the money you save is not really your money, you owe debt so you are not saving per se (in and of itself).

 

If you don't have a stable job, I'd save, minimize expenses, pay the minimum and/or more if you can...then when you amass enough savings to pay down debtsignificantly, pay it down in a large amount, but still have savings just in case you get fired from your job or laid off etc...so you can still pay the minimum balance on debt while you are looking for another job.

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Message 10 of 15