Are you paying any interest on the credit card debt? If so it may be better to deplete your savings account to save money in the long run.
Edit: wait a second, what APR is your consolidated debt at?
Original post assuming CC debt, but that may be a LC loan at 6% anyway:
Well, frankly given that virtually any bill can be paid with a credit card these days, you could just run the cards up again if disaster struck. Literally the only bill I don't pay with my credit cards is my mortgage currently, and I'm pretty sure I could Plastiq that for what amounts to $10 per month financing fee.
Other assets weren't disclosed which do factor into this (house, auto, 401k whatever) but I see virtually no point to savings when non-trivial debt is hanging out on a typical CC APR.
2 years to pay off = non-trivial.
Even if you paid the 10k to the cards, then min payed them for literally months to rebuild some savings, you'd still come out way ahead; currently interest is likely costing about 2500 a year if not worse (I assumed ~15% APR spread), and that's just bleeding cash.
@Anonymous wrote:I'm just not sure which is the most prudent course of action. I have $17k in consolidated credit card debt that I've been working diligently to pay off for the past three years (I started with $30k). I'm now roughly two years from completely paying this debt off.
I have a small amount ($10k) of savings in a high-yield savings account. I could use that sum to pay off a little over half of the consolidation loan, thereby cutting the repayment time in half. And, once I'm done with the repayment, I'd have a lot more cash from my paycheck to contribute to rebuilding that savings.
Of course, I could also incur an emergency, get hit with a serious illness, lose my job (I hope the likelihood of any of these is low, but who knows). Is it better to retain this small amount of savings and continue paying down the remainder of the debt slowly or to pay it off more quickly and rebuild the savings?
IMHO it's better to put the money towards the loan and reduce the interest you're going to wind up paying. What you save from doing that is a lot more than what you earn on your savings.
Somewhat different situation if you have no debt >6% or whatever your nominal investment line is.
Personally as of this morning I have $64.64 in a checking account, 0 savings accounts other than 1k sitting in DCU at 5%, and maybe $250 cash sitting at home and a yuppie food stamp in my bag.
On the flip side I know I have 4K coming at the end of the week unless there is a complete meltdown in the financial infrastructure.
If something goes sideways I can get a check from my HELOC cleared in two days, tax loss harvest some underperforming equities, settle and transfer in 3, or if really really desperate, pay the wire transfer fee out of DCU and have access to that HELOC monies in about 30 minutes.
That’s if I need cash, which, I can’t really fathom where I would.
I’m really struggling to understand what type of emergency can’t be financed on a credit card TBH.
Personally as of this morning I have $64.64 in a checking account, 0 savings accounts other than 1k sitting in DCU at 5%, and maybe $250 cash sitting at home and a yuppie food stamp in my bag.
On the flip side I know I have 4K coming at the end of the week unless there is a complete meltdown in the financial infrastructure.
If something goes sideways I can get a check from my HELOC cleared in two days, tax loss harvest some underperforming equities, settle and transfer in 3, or if really really desperate, pay the wire transfer fee out of DCU and have access to that HELOC monies in about 30 minutes.
That’s if I need cash, which, I can’t really fathom where I would.
I’m really struggling to understand what type of emergency can’t be financed on a credit card TBH.