I need a Push!

[wedge421]

New Reader and first time poster. Must say Im a huge fan of all the great info you guys share here. So after reading a ton of posts I have a question of my own. My wife and I currently net $5800 a month total, we are going to be purchasing a new house in Sept that will bring our total monthly bills up to around $4k a month. I can copy and paste in the break down when I get home from work. But my questions is this, we currently have $10k in our checking account that we pay all of our bills from and $5500 in our EF which is an HSBC "high" interest savings. We currently have $4100 in CC debt $2200 of that being 0% interest the other part being 11.5%. We will only need about $2k out of pocket for our closing costs etc when we close on the house. Is it worth taking the money out of our checking to pay off the CC's in one shot? Or should I just pay off the one with interest accruing? For the past 5 years or so my wife has been the breadwinner as I have been in school and now that we are actually getting ahead I am just so weary of spending that kind of money in one shot, feeling that with the new mortgage we will never get back to our current state of saving or get any further ahead. Like I said I just need some convincing that paying off the CC's is the right thing to do immediately and someone to tell me it will be ok

[minnie1928]

Personally, I'd pay off the $1900 at 11.5% pronto based on what you've posted. The interest you are earning at HSBC is NO WHERE CLOSE to what you are paying on this card. Plus, that will lower your monthly payments, freeing up more cash flow per month.

Although, posting something with more details would help us provide suggestions for your particular situation.

[project15]

Pay off that 11.5% card first! Then build up the EF, then save for a down payment. You don't NEEEEEED a house right now. What happens when you have a major home repair and your EF isn't big enough to cover it? That credit card gets a revolving balance on it again and you dig yourself into debt. All houses are expensive. Even brand new ones.

[wedge421]

k

We have a $30k down payment from our current house sale. So I guess the consensus is pay the 11.5 off.

[Alex_Adviser]

Credit card interest payments are not tax deductible. The main thing you can do is to begin paying more of your credit card debt down and to use the savings from paying down that debt to put towards your down payment.

There's nothing wrong with using your credit card for purchases, however the best rule of thumb is that if an item is going to take you more than three months to pay off, then you'd probably be best waiting. Credit card interest rates are substantially higher than you may think, coupled with monthly charges for administering the card, you may find that the item you purchased on sale and used your credit card for ultimately costs you far more than purchasing the item at full price because of the interest rates.

[ktmarvels]

There's nothing wrong with using your credit card for purchases, however the best rule of thumb is that if an item is going to take you more than three months to pay off, then you'd probably be best waiting.

I would argue this point....unless it is an absolute emergency you shouldn't use your credit card to buy the item unless you already have the money!

[anonymous_saver]

I actually would just pay off both CC just to get it off my mind. Yes, I get that you could keep the one at 0% until it raises and then just pay it off, but really, wouldn't it feel good just to get it done with. Unless of course, do you have other debts (medical, school loans, car loans, etc.)?

Are you putting at least up to your employers match in your retirement accounts? This should be done immediately.

Why keep 10k in checking? I would move over some of that into your EF.

So what are you going to do with the $1,800 left over each month? I'm assuming that's what you mean when you say your expenses will be $4,000 out of the $5,800 that you will take home... I'd suggest along with putting up to the match in both of your employers retirement options, i would fully fund a Roth IRA for each of you every year. That $1,800/month would be $21,600/yr. $5,000 to each of your Roth IRA's would bring that down to $11,600. Now would that be enough to put towards your emergency fund, maybe a gift fund (holidays, birthdays, etc.), pet expenses (if you have one). My point is. If you have $1,800 left over each month, have specific plans of what to do with that money before each month. Treat each savings account as a bill.

Good luck and good job!!

[disneysteve]

Definitely pay off the 11.5% right away.

Next question: How much is the house you are buying? You are putting down 30K. That is 20% of 150K. If the house is more than 150K, I'd suggest waiting until you have a larger downpayment.

[Tree0164]

I would pay off the credit cards as well and stop using them if you have $1800 a month extra.

Good luck

[Taxplanr]

I would hold onto your cash. People get in trouble financially when they run out of money. You do not have 6 months of liquid savings on hand to pay off your debts and remain liquid.

Cash is king. It is a cliche for a reason. Keep it around. It will keep you safe.

Your getting a mortgage will greatly improve your credit scores. After the mortgage hits your credit report, see if you can roll the higher rate card to a 0%, 0 transfer fee card. Accumulate the payoff in a savings account over the next 12 months and pay it off in one shot. That way you will remain liquid and safe.