Pay off some of cc debt or keep savings?

[Anonymous]

I have about $3500 in savings, and about $10k in credit card deb (interest rates on all 3 cards are between 4.99 and 7.99 interest rate).

Do I keep my savings, as my job is not totally secure, or pay down some credit card debt? I'm torn, as spending ALL of my savings would only take away a third of my cc debt.

My interest rates are manageable, my gut says keep the savings for an emergency fund.  And keep making my cc payments (I pay two to three times the minimums).

Thanks!

[Woolfman]

If it was me i would  keep the Savings and Just keep making an effort to pay up and above your min payments .

Message Edited by Woolfman on 03-18-2009 01:45 PM

[score_building]

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@Anonymous wrote:

I have about $3500 in savings, and about $10k in credit card deb (interest rates on all 3 cards are between 4.99 and 7.99 interest rate).

Do I keep my savings, as my job is not totally secure, or pay down some credit card debt? I'm torn, as spending ALL of my savings would only take away a third of my cc debt.

My interest rates are manageable, my gut says keep the savings for an emergency fund.  And keep making my cc payments (I pay two to three times the minimums).

Thanks!

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unless you somehow found a high yield savings that nets you more than 5-8% it's a no brainer imo:  pay off your revolving debt post haste.

nice rates but you'll be less dependent on keeping them if you pif /lower your balances.  they are perhaps more likely to increase if you show a pattern of revolving large amounts (and may still go up even if you don't.  but at least it won't hurt you if you don't have any balances accruing interest).  GL!

[CreditAble]

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@Anonymous wrote:

I have about $3500 in savings, and about $10k in credit card deb (interest rates on all 3 cards are between 4.99 and 7.99 interest rate).

Do I keep my savings, as my job is not totally secure, or pay down some credit card debt? I'm torn, as spending ALL of my savings would only take away a third of my cc debt.

My interest rates are manageable, my gut says keep the savings for an emergency fund.  And keep making my cc payments (I pay two to three times the minimums).

Thanks!

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How many paychecks does the $3,500 represent? I would keep at least a one month cash reserve. I would use the rest to pay down debt. At the same time I would resolve to pay all of the debt off as fast as possible. Cut back expenses, pay more than ever every month.

"Manageable" interest rates means that you have no trouble coming up with the interest payments. The interest payments are still real money that is being thrown away every month. Just because you can manage the interest (presumably without feeling pain) doesn't mean that you shouldn't make getting out of debt a high priority. Interest rates are going to go up a lot. the new credit laws guarantee that.  The only way to "manage" in the coming tighter credit squeeze  is to have lower debt balances.

You are very wise in seeking to lower your debt load. Unfortunately just using savings to reduce some of the debt is not a plan that will in itself achieve your objective. Resolving to lower the debt every month in addition to any lump sum pay down (from savings), is essential to win the battle.

No matter what you do I would suggest this approach. Add your savings to your debt and you will come up with a negative "net worth" figure. Make a budget as part of an overall plan to increase your net worth by a certain amount each and every month.

If your net worth goes down in any given month, correct the problem immediately the following month by taking the necessary (sometimes painful) measures. You will be on your way to having real savings that won't be need to pay off debt.

If one simply pays down debt with no plan or goals, it is easy to go deeper into debt when money gets a little short. The net worth approach keeps the account books a little more honest. It is a simple plan really. If you don't meet your net worth increase goals one month, you simply forgo buying anything but absolute necessities the next month.

Sooner rather than later you are out of debt. You don't even have to sacrifice many purchased pleasures. So long as your net worth is increasing, you can spend a little money on "extras" . 

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[Creditaddict]

we just had a very similar post about 2 weeks ago and I said pay debt off but then thought about it more and...

In the past before credit crunch and what not, Suze Orman said why throw money away paying more for your money than you earn (credit card being 12% but making 2% in savings, you are loosing 10% on your money, so if you have debt don't save) HOWEVER, with job losses and credit crunch she has changed her view and so have I. If you have NO other savings, I would for sure say keep that in savings so you have 3 months of emergency fund at least, Suze is now saying like 6-8 months!

I ended up opening a savings account with Wachovia last week and now am adding $100/every 2 weeks to it, feels good too!

[Anonymous]

Thank you all so much! I'm new to The Forum and am loving it!!!

I've been watching Suze Orman's show, trying to get her take on it. Suze would push the 8months emergency fund really hard, but then I would hear her talk about paying interest on credit cards. So I just kept confusing myself.

It is a tough call, but I think it best to keep some savings while (as another poster mentioned), making every single possible effort to keep paying more than minimums and not to charge ANYMORE.

If I use up all of my savings, I will no doubt have to resort to credit cards should an emergency come up. I think I will live in less financial fear if I have a small cushion.

Thanks to all of you, this is a tremendous resource!!

[marty56]

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@Anonymous wrote:

I've been watching Suze Orman's show, trying to get her take on it. Suze would push the 8months emergency fund really hard, but then I would hear her talk about paying interest on credit cards. So I just kept confusing myself.

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I have seen her repeatably admonish poeple for having savings and credit card debt.  As I have said before, if you have no CC debt and loose your job, you can afford to take a lower paying job.

[Anonymous]

Have you been to Suze Orman's site lately?   She has written an article there entitled "New Credit Card Strategy".  She stated, "If you have unpaid credit card balances and not much saved up in emergency savings I need you to listen up.  My advice has changed."   That advice is to pay ONLY THE MINIMUM on your credit cards. 

Last Saturday, March 14, on her show she had a message to the credit card companies and a message to us credit card holders.  She was really upset with this new credit card reform bill that won't be coming out until June/July 2010.  Suze stated by that time the credit card companies will have done all the damage to us that they possibly can and for us to write our congressmen and tell them we want that bill enacted sooner to protect our rights.  She also stated it's going to get worse with the slashing of credit card lines, etc. and to just save your money.

[score_building]

 Tonia wrote:

Have you been to Suze Orman's site lately?   She has written an article there entitled "New Credit Card Strategy".  She stated, "If you have unpaid credit card balances and not much saved up in emergency savings I need you to listen up.  My advice has changed."   That advice is to pay ONLY THE MINIMUM on your credit cards. 

i like Suze and think highly of her in general.  however, she can afford to tell others to pay the minimum (while ALL of her cc balances are zero) -she won't be around to help those people when their ccc enacts AA, CLD and account closures like rapid fire.

the bottom line for me personally is that carrying expensive debt while accumulating "high yield"savings (at 3%?) is one of THE most expnsive ways to "save" and is STILL to be avoided at all costs.  i'll have to read up on how she can justify this 360 when she has always recommended reigning in cc debt irrespective of individual differences and personal circumstances.

[Creditaddict]

The reason for this drastic change of mind is your reason exactly... the Credit Card companies are not playing fair, they are CLD, Closing, Hiking interest rates to boot and people were using savings accounts to pay them off quicker thinking they would have them to use if emergency and then with layoffs soaring, they all of a sudden find themselves without a job and with less than 1 month savings and new CLOSED credit cards.  So she is simply saying, yes it's more expensive but UNTIL you have a good cushion of savings in case of layoff just pay min on credit cards and then as soon as you have that savings, attack the credit cards like no business.  AND I still have seen her make exceptions and tell people to pay credit cards off over more savings or having savings but it's rare right now because of what's been happening to her viewers.