Since the economy is so bad should I hold off on paying off my CC debt?

[AccountAnalyzer]

Right Now my balance is $790 and I have double that in my savings but I want to keep increasing my savings right now because you never know what could happen down the line. I don't want to pay off the $790 and have my savings fall back down to $600 so should I just pay a little each month and continue to raise my savings account?

[mrpaseo]

If you are being charged on your credit card more than you are making in your savings account, then I suggest you pay off your cc.

[red92s]

Economic downturns are the worst times to have debt, not the best.

[maat55]

I would pay down the debt and rebuild your EF quickly. CC debt is a weed that can get out of control, when you have to ignore it. Just get rid of it while it is tiny.

[AccountAnalyzer]

I would pay down the debt and rebuild your EF quickly. CC debt is a weed that can get out of control, when you have to ignore it. Just get rid of it while it is tiny.

But my CC limit is $800 so it can go no higher than that and I was figuring why not just manage the debt and increase my EF account so that by February I can be close to $5000. It just too me so long to finally get over a $1000 and now I don't ever want to fall below that again. I want to continue to go up and up and the CC debt will continue to fall slowly during that time.

[hakuna matata]

But my CC limit is $800 so it can go no higher than that and I was figuring why not just manage the debt and increase my EF account so that by February I can be close to $5000. It just too me so long to finally get over a $1000 and now I don't ever want to fall below that again. I want to continue to go up and up and the CC debt will continue to fall slowly during that time.

Personally I would pay off the debt first. But you also left off some details--are you paying the minimum each month on the credit card? Or are you paying off substantial payments each month? What is the interest rate?


I did a quick online search for calculating this and let's say you have an 18% interest card and pay the min each month. Then of your $20 payment, over half goes to interest. $12 of each payment goes to interest and $8 goes to the principal. So unless your savings is giving you that kind of return--paying off your credit card debt makes more sense. Do you not agree?

You really need to start thinking in those kinds of terms to understand why you shouldn't have any credit card debt. You are making negative money that way!

[AccountAnalyzer]

Personally I would pay off the debt first. But you also left off some details--are you paying the minimum each month on the credit card? Or are you paying off substantial payments each month? What is the interest rate?


I did a quick online search for calculating this and let's say you have an 18% interest card and pay the min each month. Then of your $20 payment, over half goes to interest. $12 of each payment goes to interest and $8 goes to the principal. So unless your savings is giving you that kind of return--paying off your credit card debt makes more sense. Do you not agree?

You really need to start thinking in those kinds of terms to understand why you shouldn't have any credit card debt. You are making negative money that way!

See I have a unstable job and trying to find a more stable job by this time next year. The way my job works is they have to receive funding at the end of every June so by June of 2009 I don't want to be stressing about a possible layoff since I plan to have about $6000 in the EF. Plus I'm thinking of moving so Saving Right Now just makes more sense even though paying off the CC debt would be the right thing.

[hakuna matata]

See I have a unstable job and trying to find a more stable job by this time next year. The way my job works is they have to receive funding at the end of every June so by June of 2009 I don't want to be stressing about a possible layoff since I plan to have about $6000 in the EF. Plus I'm thinking of moving so Saving Right Now just makes more sense even though paying off the CC debt would be the right thing.

Well I can't speak to the other factors in your life. But in general it is best to pay off credit card debt first. Between now and next June if you pay the minimum each month your $800 will be down to abour $730. So you will pay the credit card company $180 and will only reduce your debt about $70. So if your EF is making $110 in interest that makes sense. But you and I know it will make nothing in the next 9 months.

But if you paid off the $800 in June according to your numbers you would have $5200 which puts you ahead of the game.

All you are doing is paying $110 for some false peace of mind. But I understand we all have to do things such as this sometimes in our life to get by. I have done similar financial things that seemed to be logical at the time but now in hindsight were not the best course of action. Again you need to do what you think is right for your life--but you asked, and my response is still to pay off the $800 debt first. Good luck though

[AccountAnalyzer]

Well I can't speak to the other factors in your life. But in general it is best to pay off credit card debt first. Between now and next June if you pay the minimum each month your $800 will be down to abour $730. So you will pay the credit card company $180 and will only reduce your debt about $70. So if your EF is making $110 in interest that makes sense. But you and I know it will make nothing in the next 9 months.

But if you paid off the $800 in June according to your numbers you would have $5200 which puts you ahead of the game.

All you are doing is paying $110 for some false peace of mind. But I understand we all have to do things such as this sometimes in our life to get by. I have done similar financial things that seemed to be logical at the time but now in hindsight were not the best course of action. Again you need to do what you think is right for your life--but you asked, and my response is still to pay off the $800 debt first. Good luck though

So what I want to ask is if I was to pay it off, how does having a CC with a $800 credit limit help me if I want to get another Apt or get laid off?

[maat55]

But my CC limit is $800 so it can go no higher than that and I was figuring why not just manage the debt and increase my EF account so that by February I can be close to $5000. It just too me so long to finally get over a $1000 and now I don't ever want to fall below that again. I want to continue to go up and up and the CC debt will continue to fall slowly during that time.

By your numbers, if you were to pay it off and then rebuild the EF, you would 4,210 + what you are not paying in interest.

Worst case, you may have to use the card back to 790.00, but for now you would not pay interest, by paying it off. You will probably find a way not to use the card in the mean time.

[disneysteve]

So what I want to ask is if I was to pay it off, how does having a CC with a $800 credit limit help me if I want to get another Apt or get laid off?

Right now, your CC is maxed out. That lowers your FICO score. By paying it off, you will improve your credit rating. When you go looking for an apartment, the landlord will probably do a credit check. Potential new employers may do the same, so improving your FICO could come in handy.

Financially, you will save the money that would have been wasted on CC interest. If an emergency arises before you are able to build up your savings, you could use that $800 line of credit to cover expenses temporarily.

I don't see any reason why keeping the debt is to your advantage.

[hakuna matata]

So what I want to ask is if I was to pay it off, how does having a CC with a $800 credit limit help me if I want to get another Apt or get laid off?

Credit is just that--CREDIT. If and this is a big IF you need to draw against the credit card, you do so at the time you need to. Lets say you pay if off, you now have $4200 saved instead of $5000. Things get tight because you can't get another job--then you can use the credit card to float you if you need it. It can buy your groceries, pay your electric bill, heck it might even be able to be used to pay your rent. But those all are last resorts--a credit card should be used sparingly and paid off in full each month. Any other use where you are paying is a waste of money in my opinion.

go to this page--just one I randomly picked off the internet, but it gives a good explanation why this isn't a good thing:

Finance FREAK .com - Owing Money - How Credit Cards Work 1


Your way, you have $5000 and a $800 debt--but that $800 debt is a lot more then $800. You just aren't looking at it correctly. Things get tight---what are you going to do? What is your safety net? And you are carrying all that money in interest as well. You are basically losing money each and every month. It really is that simple.

I can tell this is NOT the answer you want, you want me to tell you to build up your EF and carry the credit card debt. Do that if that is what you want to do, but in my humble opinion it is not the right thing to do.

[AccountAnalyzer]

Credit is just that--CREDIT. If and this is a big IF you need to draw against the credit card, you do so at the time you need to. Lets say you pay if off, you now have $4200 saved instead of $5000. Things get tight because you can't get another job--then you can use the credit card to float you if you need it. It can buy your groceries, pay your electric bill, heck it might even be able to be used to pay your rent. But those all are last resorts--a credit card should be used sparingly and paid off in full each month. Any other use where you are paying is a waste of money in my opinion.

go to this page--just one I randomly picked off the internet, but it gives a good explanation why this isn't a good thing:

Finance FREAK .com - Owing Money - How Credit Cards Work 1


Your way, you have $5000 and a $800 debt--but that $800 debt is a lot more then $800. You just aren't looking at it correctly. Things get tight---what are you going to do? What is your safety net? And you are carrying all that money in interest as well. You are basically losing money each and every month. It really is that simple.

I can tell this is NOT the answer you want, you want me to tell you to build up your EF and carry the credit card debt. Do that if that is what you want to do, but in my humble opinion it is not the right thing to do.

I think it all has to do with the amount of money you have coming in each month. I'm only able to save $400-$500 a month and I guess if I was able to save More like $1000 then paying of the CC debt wouldn't be such a biggie

[Bimmer]

One other thing to consider: If you float the CC debt, and things get tight, do you really want to have to find a way to make the minimum payment on the CC? Would'nt it be nice to know that there is one less bill you have to worry about paying?

Pay it off, be done with it. Be frugal for a couple of months and you'll have the EF where you want it.

[AccountAnalyzer]

One other thing to consider: If you float the CC debt, and things get tight, do you really want to have to find a way to make the minimum payment on the CC? Would'nt it be nice to know that there is one less bill you have to worry about paying?

Pay it off, be done with it. Be frugal for a couple of months and you'll have the EF where you want it.

I guess my goal is to have 6 months rent in the bank and the fact that I'm only able to save money out of one paycheck a month, i just really don't want to see my EF account fall to $500 because of paying off my $790 American Express balance.