I have 1100 in a account that is earning minimal $, and I have 2 cards w/870 at 24% should I withdraw and pay

Question

My money market account earns very little in the way of interest but I have alot of credit card debt 8k If I withdraw 870 of the 1100 I can pay off two of the three cards that charge me appoximately 24% APR. Would you cash out?

Answer 1

Yes, I would cash out, BUT do NOT close those paid off accounts.

Closing an account that has good payment history can damage your FICO credit score in 3 ways. Closing an account can never help your score, it can only hurt it. If you have the dreaded Universal Default clause in your Terms and Conditions (i.e., the fine print) of any credit card, and you close an account with bank A and cause a drop in your credit score, that can set off the Universal Default clause at Bank B and send your interest rates soaring for Bank B's card.

First, 30% of your score is about how much of your credit limit you're using. They score each individual account, and they score your total balance compared to your total credit limit. You want to keep balances below 30% of your limit, else you risk hurting your score. So on that paid off card, if you close it, you don't change your total balance (total balance minus 0 = same balance) , but you DO drop your total credit limit, and this causes your total utilization percentage to rise. I've read several posts online from people who have tripped their Universal Default clause this way, even though they've never been late with payment.

Second, 15% of your FICO score is for length of credit history. You can continue to score more points here for at least 99 months (at least 8 years, 3 months) by keeping your oldest account open. Look at your Equifax credit report and you'll see the number of months reviewed. Keep the account open for the one that shows the earliest date opened.

Third, 10% of your FICO score is for credit mix, the types of credit you use. The good ones are mortgage, major credit card (MC,V, AE, Disc), department store card (Macy's, e.g.), secured auto loan. The bad ones are payday loans, personal finance lines of credit, and overdraft loans. Close out all your store cards and you'll shrink your good credit mix, which is bad. Ideally, you want one open account in each of the four types of good credit.

One other consideration. Do you have enough liquid assets (easily convertible into cash) such that you can cover most typical emergencies: job loss, car repair, car towed or moving violation, uninsured medical issues? If not, don't pay off the cards. Instead try to transfer the balances to lower interest cards.

Please vote: Did this help?

Answer 2

Yes! You should pay off any debt at a higher interest rate than you can earn it at.

$1100 at 10% (will not find) compounded yearly is $110 of interest

Your $870 at 24% compounded yearly (which it isn't) is $208.80

Simply put even at only yearly compounding you'd lose your shirt and your pants too. Plus you'd have to pay taxes on your $110 dollars of interest, but don't get a break on credit card interest. (you do on a home mortgage).

Take it all out and pay off as much as you can starting with the highest card, even if you can't pay it off. Keep the cards though in case an emergency comes up because you no longer have a savings.

Answer 3

Yes. 24% is way too high. If you don't want to cash out, at least get a different credit card. I get offers almost every day for cards with very low rates. You could use the new one to pay off the high-rate cards you have now.

Answer 4

Pay off the credit card. In an emergency you can always get a cash advance against the credit card.

Answer 5

No brainer.

Pay them all off.

If you had no savings, wouldn't you jump at the chance to borrow $1100 at "very little in the way of interest" to pay off card debt at 24%? Of course!

Answer 6

GET RID OF YOUR 24% CARD NOW!! Anything over 10% ...you'll never pay it off! Try the bank...they may have a consolidation loan just for you...

Good Luck!
ps..burn that 24% department store/costco or whatevercard..

Answer 7

Yes! You're losing more and more money every day you don't do that. Unless of course you are planning on reporting bancruptcy, but if you did they'd take that money anyways.

Not to mention that 24% is insane. You don't need a credit card *that* bad...

Answer 8

Your buddy is mendacity. The debt creditors can no longer pass into somebody's account and take each and all the money or any money. they could get sued and finally end up in reformatory in the event that they did. in the journey that your buddy is in hassle with debt creditors the possibilities are high your buddy has spent all their money yet won't admit it so is making stuff up as an excuse for having no money. a standard request to them could be to get them to teach you their financial company fact or on line financial company fact. A print out they did of their financial company fact isn't ideal as its ordinary to regulate with photoshop. If there is evidence the financial company paid money to a somebody without the account holders consent then the financial company is in danger of interchange each and all the stolen money. i've got dealt with people in debt till now and that they fool all of us around them to make it appear like they're the sufferer whilst in certainty they pass out and willingly spend all their very own and borrowed money on stuff.