Use savings to pay credit cards?

[Dis0314]

I have about $16k in credit card debt all current and everything and I figure it will take about 3 months to pay off without dipping into savings.. I have about $35k in easily accessible savings and I'm trying to decide if I should just bite the bullet and pay the cards off or at least some of it to get utilization down below 20% or whatever the magic fico number is.. 

What would yall do?

I run my own businesses and this years income will be fairly stable.

[FlaDude]

For me it would depend how much interest I was paying. If you have it in low/0% cards, then I would just wait if you can get it paid off in three months anyway. If the interest is high, then I'd use savings, but then work to replentish over the next three months with what I woudl have paid on the cards.

[Dis0314]

yeah its high.. I'm paying like $450 a month in minimums which is barely covering the interest.. sucks lol

[Dis0314]

my thinking is pay it off which saves that expensive monthly payments and if bad stuff happens in my life the freed up credit is almost just as good as the cash that I would of used in the bank..

[FlaDude]

Unless you're earning amazing interest on savings, it seems like you would be saving over a grand by paying now, I'd go for it.

[DaveInAZ]

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@Dis0314 wrote:

yeah its high.. I'm paying like $450 a month in minimums which is barely covering the interest.. sucks lol

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I think that's an easy decision then, use your savings to pay off the CCs, and put that $450 per month you'll save on CC payments back into savings.

[Anonymous]

Is your savings in tax-privileged accounts like IRAs or 401ks?

Or are you describing having a bunch of cash sitting in a savings account earning 2% annually?  If so, I share the confusion of the other commenters -- unsure how this could be a hard problem to solve.

[Anonymous]

Pay it off. There's no point in paying credit card interest rates. 

If you are worried about what might happen in an emergency do this:

1. Pay it down

2. Wait for FICO to go up (and it will)

3. Apply for a line of credit

The line of credit will be there for emergencies and will have way better interest rate than your credit card does.

[Anonymous]

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@Dis0314 wrote:

I have about $16k in credit card debt all current and everything and I figure it will take about 3 months to pay off without dipping into savings.. I have about $35k in easily accessible savings and I'm trying to decide if I should just bite the bullet and pay the cards off or at least some of it to get utilization down below 20% or whatever the magic fico number is.. 

What would yall do?

I run my own businesses and this years income will be fairly stable.

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I feel compelled to offer my two cents here. 

1) you say it will take 3 months to pay off your $16K credit card debt. 

   a. great! then pay it off in 3 months and keep your savings as is

   b. excellent! If you are disciplined enough to replace that $16K in three months, then absolutely pay off the cards

   c. unfortunately, most people are not disciplined enough to do b.

2) what led you to get $16K in debt?

  a. if you do take the money from savings to pay the debt, what will you do differently to not allow that to happen again?

3) will you have at least 6 months worth of savings to get you through in case of business failure/downturn/unplanned event?

I am guilty of this. While I do not carry debt, there are times where I spent a little more than I should and I take $100 here and there from savings and I am not always good about replacing it. 

Another example is my sister: my siblings and I came into some money in 2015 for the sale of property held by my fathers side of the family. When my father passed away eons ago, nobody bothered to have his name removed from the deed of this property, so when they (my mostly estranged paternal side of the family) wanted to sell, they had no choice but to reach out to my long ago remarried mother. Long story short, my mother did not lay any claim to the property but felt it would only be fair for my father's children (us) to inherit what would have been my father's share of the property. 

Every dime of my money is sitting in the credit union earning interest until I buy a home. Meanwhile my siblings blew through their money. My sister used her funds to pay off debt....two years later in 2017 my sister took out a nearly $20K loan from USAA to...you guessed it, repay debt. My point is, people in the United States have a tendency to continue the cycle of getting into debt. 

My point of my long drawn out story is that I think its great if you want to take funds from a low interest savings account to pay off high interest credit card debt; just be sure to repay yourself! 

[Floyduda]

Agreed!!