topic Re: Should I use savings or carry a balance! in Credit Cards

Should I use savings or carry a balance!

Nova5041 — Mon, 05 Oct 2015 05:19:18 GMT

This might be a silly question, but I have a large expense that I can not pay at once and would need a few months to pay off. I was thinking of just going into my savings and paying off the expense once i received the credit card bill or should I leave the savings alone and just make payments to my credit card company. I only ask this question because of the whole pay your self first philosophy! Thanks

Re: Should I use savings or carry a balance!

Pway — Mon, 05 Oct 2015 05:24:29 GMT

Yes leave your savings alone. It does not hurt to carry a balance. You have your plan set and stone, leave your savings alone. Yes make the monthly payments per month to the credit card company.

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 05:30:31 GMT

Im in kind of the same situation. Considered using a portion of my savings but decided Id rather open a card with a long 0% intro and pay it over time. Not sure if you'll end up paying interest on this expense but if so take that into consideration. If I was facing high interest fees I might have made a different decision.

Re: Should I use savings or carry a balance!

Nova5041 — Mon, 05 Oct 2015 05:57:42 GMT

@Anonymous wrote:
Im in kind of the same situation. Considered using a portion of my savings but decided Id rather open a card with a long 0% intro and pay it over time. Not sure if you'll end up paying interest on this expense but if so take that into consideration. If I was facing high interest fees I might have made a different decision.

Yeah, wish I could do that. But I'm in the garden, and I just got 2 new accounts.

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 06:02:10 GMT

You're grown, you can do what you want. No one will stone you for stepping out of the garden for a purpose. lol But if your profile doesn't support adding a 3rd new account and you feel you'd be denied then thats understandable.

Re: Should I use savings or carry a balance!

Nova5041 — Mon, 05 Oct 2015 06:07:24 GMT

Lol, yeah that's my biggest concern, my credit score is still weak, and I don't want to be denied and have another inq.

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 06:10:48 GMT

Got it. In that case garden strong. Which card would you be using and whats the interest rate if any?

Re: Should I use savings or carry a balance!

Nova5041 — Mon, 05 Oct 2015 06:49:47 GMT

@Anonymous wrote:
Got it. In that case garden strong. Which card would you be using and whats the interest rate if any?

Unfortunately my CSP at 15.99 is my lowest Apr.

Re: Should I use savings or carry a balance!

bada_bing — Mon, 05 Oct 2015 08:50:19 GMT

@Nova5041 wrote:
@Anonymous wrote:
Got it. In that case garden strong. Which card would you be using and whats the interest rate if any?
Unfortunately my CSP at 15.99 is my lowest Apr.

What is your savings invested in ?

If it's a low or no interest account, I would use the savings and pay it back

rather than let it sit on a card at 15.99%. If you have been PIF on that card

and use it for monthly spending, the out of pocket cost will actually be more

than just 15.99% on the one large purchase. You'll loose the grace period and be

paying interest on your monthly spending charges from the day of each swipe.

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 12:43:02 GMT

@bada_bing wrote:
@Nova5041 wrote:
@Anonymous wrote:
Got it. In that case garden strong. Which card would you be using and whats the interest rate if any?
Unfortunately my CSP at 15.99 is my lowest Apr.
What is your savings invested in ?
If it's a low or no interest account, I would use the savings and pay it back
rather than let it sit on a card at 15.99%. If you have been PIF on that card
and use it for monthly spending, the out of pocket cost will actually be more
than just 15.99% on the one large purchase. You'll loose the grace period and be
paying interest on your monthly spending charges from the day of each swipe.

I agree with the above. But I'll also throw something else in here. If it's not your only card and you'll not have to use the card for other things during this time, then I'd really think hard about what else could be coming down the road. Is this definitely a one-time expense? Is it the sign something has changed and there might be other expenses/emergencies that will bring about the same dilemma? Also, if you carry a balance for a bit, maybe you'll get a CLI (though this IS Chase so I'd have said until recently it would be impossible, now I just say it's still highly likely with or without carrying a balance.) How large is the expense vs. your savings? Would it wipe out your savings entirely? How about splitting it so you're not taking your savings to zero and are minimizing the interest damage? (I'm much better at questions than answers.)

Re: Should I use savings or carry a balance!

kdm31091 — Mon, 05 Oct 2015 12:45:24 GMT

I see nothing wrong with carrying a balance if you have a specific reason and a plan to pay it down. Take note that your score will temporarily go down if you carry a large balance, but it will recover as you pay it off. With no apps planned, doesn't matter.

I would recommend a split approach as well; if carrying the balance is going to practically max out your card or anything, then use some savings and charge the rest. Never drain all of your savings though IMO because that's liquid cash and you need to have some available.

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 12:49:17 GMT

With such a high interest rate, I would much rather dip into savings, but it also depends on what fraction of savings we are talking about.

If paying it would use a large proportion of my savings, I MIGHT need to think harder, and maybe decide to pay the excessive interest, to maintain a safety net for immediate expenses that cannot be paid over time.

But otherwise, no, "Save" the interest and use savings, you are not "paying yourself first" by letting all that interest money go to a ccc.

Re: Should I use savings or carry a balance!

takeshi74 — Mon, 05 Oct 2015 13:08:01 GMT

@Nova5041 wrote:
This might be a silly question, but I have a large expense that I can not pay at once and would need a few months to pay off. I was thinking of just going into my savings and paying off the expense once i received the credit card bill or should I leave the savings alone and just make payments to my credit card company.

It's not silly at all but there isn't one answer that applies for every person and situation. While the card will charge you more interest than you'll earn with savings that isn't the only consideration. You should have an idea of what cash reserves you need/want and your level of comfort when dipping into them. Are you fine with reducing your savings balance by that amount for the few months you would have needed need to pay that balance so you can replenish your savings? Are there any other foreseeable events in future that might have an impact?

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 14:06:57 GMT

I know you said your scores weren't great, but maybe something else to consider would be taking out a personal loan? I believe you should be able to find something with a lower interest rate than your CSP. Have you checked with whomever you're making the purchase from as well to see if they have any financing options?

Re: Should I use savings or carry a balance!

lhcole77 — Mon, 05 Oct 2015 15:02:01 GMT

And never overlook the fact that carrying balances (of any reasonable size) and paying them off in a timely manner shows creditors responsible behavior.

I carry a small balance (on non 0% cards) from time to time, pay a buck or two of interest here or there. I throw a little change at my lender every now and then. I can't guarantee that it has helped increase my internal scoring or success with lenders, but I do know that all my cards have successfully grown over the years and I have used this strategy from day one.

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 15:07:26 GMT

@lhcole77 wrote:
And never overlook the fact that carrying balances (of any reasonable size) and paying them off in a timely manner shows creditors responsible behavior.

I carry a small balance (on non 0% cards) from time to time, pay a buck or two of interest here or there. I throw a little change at my lender every now and then. I can't guarantee that it has helped increase my internal scoring or success with lenders, but I do know that all my cards have successfully grown over the years and I have used this strategy from day one.

Even if it was responsible, I have problems justifying paying any interest for "growth". What is growth worth in real terms (past a certain point)? And, I have never paid interest and seen many of my cards grow. Getting money from swipe charges should be enough

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 15:18:34 GMT

@Anonymous wrote:
@lhcole77 wrote:
And never overlook the fact that carrying balances (of any reasonable size) and paying them off in a timely manner shows creditors responsible behavior.

I carry a small balance (on non 0% cards) from time to time, pay a buck or two of interest here or there. I throw a little change at my lender every now and then. I can't guarantee that it has helped increase my internal scoring or success with lenders, but I do know that all my cards have successfully grown over the years and I have used this strategy from day one.
Even if it was responsible, I have problems justifying paying any interest for "growth". What is growth worth in real terms (past a certain point)? And, I have never paid interest and seen many of my cards grow. Getting money from swipe charges should be enough

This is me. I don't plan on paying a dime of interest to a credit card company as long as I live. Obviously situations may arise where I have to, but certainly not on purpose.

Re: Should I use savings or carry a balance!

lhcole77 — Mon, 05 Oct 2015 15:32:24 GMT

Definitely not part of everyone's game plan That's for sure

Re: Should I use savings or carry a balance!

Anonymous — Mon, 05 Oct 2015 15:50:57 GMT

Another question is "where are the savings located?" Are they in an IRA or 401k, where you will have to pay a penalty for a withdrawal? Or are they in a typical savings account provided by a bank, where you can access them easily? If it is the IRA/401k route, I would probably put it on the card and eat the interest. If it is savings, I would rather dip into the savings account and set myself a repayment plan. If you are truly ambivalent about the interest, then you might as well pay it to yourself, rather than the CCC.

Re: Should I use savings or carry a balance!

lenz99 — Mon, 05 Oct 2015 17:22:39 GMT

Unless you're in 0 APR, don't carry a balance if you can PIF.

One major problem with balance, especially a very small one(purposely), is that the grace period will be gone and all new purchase starts incurring interest at the time of purchase immediately.