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Saving money while paying credit cards, or pay credit cards first and then start saving

K

krunchykrome

Lifer
Common sense would say to pay off the 15%+ APR credit cards before throwing cash into savings at 4.25%+ APY.

But most of my savings have been depleted within the last two years, and Id like to build that comfort cushion again.

Would you pay off credit debt first before saving money, or save money while making smaller (but much greater than minimum) credit payments?

What do you think?
 
Pay off your credit card bills. What's the point of a comfort cushion when it is just an illusion? It's not a comfort cushion if you have more debt than savings. If you needed cash, you could just charge it to your credit card.
 
For most cases, the best thing is to pay off the CCs. It is silly to pay 15% while earning 4.25% on that same money. Then if an emergency happens, charge it on your CC.

Thus, I'd personally put everything I can into paying off the CCs (clearly avoiding the problem where it is an emergency to buy food/gas). At the same time, I'd skimp myself for a bit to accelerate the whole process. Then and only then, I would build savings. Plus, I'd learn to get a real loan next time instead of using the CC as a loan.
 
Make sure you have enough money in savings to cover a rainy day and pay off the credit card debt.
 
stop looking short term. cc debt grows at a higher rate than your savings gets. pretty simple equation really.
 
Call the CC company and get a lower APR. If you are truly just paying off tell them that you are going to do a balance transfer if they don't give you something less then 10% on your current balances (new charges would still be higher). I got my balances down to a fixed 6.99% for the life of the balance, but new charges are at the usual 10%. Worth a shot at least!
 
This is the most fundamental thing about savings. Get rid of cc debt first.

The only thing you should have is maybe student loans, a mortgage, and a car loan.
 
You're already on the wrong side of the comfort cushion equation, so there's no reason to build a fake one. Get rid of the CC debt. If you get stuck you can always just put it back on your CC again.
 
Pay the CC off ASAP, what were you thinking? What's the point in having money in the bank if you technically owe it back to a credit card company?

If your credit card debt is greater the money in your savings, then you should be putting as much money as possible into paying off your card.
If your credit card debt is less than the money in your savings, then pay it all off right now
 
Originally posted by: NoMoMoney
Call the CC company and get a lower APR. If you are truly just paying off tell them that you are going to do a balance transfer if they don't give you something less then 10% on your current balances (new charges would still be higher). I got my balances down to a fixed 6.99% for the life of the balance, but new charges are at the usual 10%. Worth a shot at least!
Click to expand...

that's actually a great idea!
 
how much cc debt is too much though? My buddy who is a mortgage broker says it's better for your credit to have a little debt...but to make sure to pay it every month without being late. I have like $600 on a cc with a $4k limit @ 14%....I've had it open for more than a year...

thinking if paying it off....but I also want to improve my credit score (680+-)...

???
 
Originally posted by: jcuadrado
how much cc debt is too much though? My buddy who is a mortgage broker says it's better for your credit to have a little debt...but to make sure to pay it every month without being late. I have like $600 on a cc with a $4k limit @ 14%....I've had it open for more than a year...

thinking if paying it off....but I also want to improve my credit score (680+-)...
Click to expand...
Um, do you know if you use a CC and pay it in full each month that you have a little debt showing up on your credit report (because even if you pay it in full, you have already likely charged something for the next month)? Pay it in full each month and save a bundle on interest. Your credit score won't benefit by having more than this baseline of debt. As it is, you are paying a ton of money and gaining absolutely nothing.

Pay it off now, all $600. Then charge something for $10. Bingo, you pay no interest and you have debt. Next month pay off that $10 in full and buy something else for $250. Again, you pay no interest and you have debt. Next month, pay off the $250 in full and buy something for $99. Again, no interest payments and you have debt. Repeat. Note: these numbers are just randomly chosen, how much you spend in the month is meaningless.
 
pay as much off on the credit card as you can. You really aren't saving anything if you have this debt. If you really need money for an emergency i.e a true emergency like hospital bills or if you lose your job then you can take a cash advance on your credit card and blance transfer to a lower interest card later.
 
I saved up a small cushion first. I guess it wasn't really there, but having the next 2 months rent in cash was comforting to me. Paychecks went 30% to savings, 70% to payments until I hit that 2 month mark. After I hit that mark, I stopped saving and pushed everything into cc's.
 
You don't have a comfort cussion... you're in debt and at 14% apr you're getting assraped by the CC companies.

In any case, you shouldn't have any CC debt at all.... overspending on your credit card is for dumbasses, you can get a loan at half the interest rate.
 
Originally posted by: jcuadrado
how much cc debt is too much though? My buddy who is a mortgage broker says it's better for your credit to have a little debt...but to make sure to pay it every month without being late. I have like $600 on a cc with a $4k limit @ 14%....I've had it open for more than a year...

thinking if paying it off....but I also want to improve my credit score (680+-)...

???
Click to expand...

Yeah he's talking about loans, not CC debt. Anyone that tells you that it's good to have CC debt needs to be slapped upside their head.

I'm 22 and my credit score is 750 and have 15K car loan.
 
Anything over 10% is a complete scam in my opinion. Call them up and have them lower your rate if you haven't screwed up your credit.
 
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