$4000 in CC debt and I want to pay it off. Should I continue to add to savings or solely focus on CC til pd?

Question

I chopped up the card and vowed to pay it off. I've developed a monthly budget where I can use $500 a month on the CC and pay it off by August. The cc has no interest yet.

OR, I can pay less on the cc bill and still add to my savings. I only have a few hundred in savings, so if I pay off the CC before saving, I won't have much of a cushion in the meantime. Your thoughts?

As soon as the CC is paid off, the $500 monthly will go solely into savings.

Answer 1

I would pay off the debt. Very good planning to have your credit card debt on a card that isn't charging interest right now, by the way. You've obviously lived without a cushion this long. I'd focus on paying off that balance and THEN accumulating your cushion. You'll feel like a million bucks!!

Answer 2

What is a small amount in your savings?

You should have $1000 in a baby emergency fund in savings and then tackle the debt. The reason you should have the $1k is so you don't use a credit card again.

Once you have the $1k in savings, pay the debt off ASAP. After all your debt is paid off then you need to grow your emergency savings account to 3-6 months of living expesnses.

For a full plan on how to get out of debt, stay out of debt and what to do with money when you are out of debt read The Total Money Makeover by Ramsey. His book is great common sense and easy to follow plan. He also has budget forms to keep you on track.

Good luck and congratulations for wanting to be out of CC debt!

Answer 3

It's a crap shoot or roll of the dice. Me? I'd pay down the CC as quickly as possible. When the balance is paid up, get a new card and use it as much as you can and pay off the balance EVERY month. You'll be using their money without interest for ten or 15 days every month. (Doing this requires discipline but sounds as though you've gotten the religion.) And continue to add to savings. Do anything you need to do to avoid interest on the CC. Good for you.

Answer 4

I would continue to pay the CC as much as possible while leaving a small amount in account for small emergencies. As soon as the credit card starts accruing interest then I would switch to my max payment possible. You did not say how much the interest will be on the credit card, but just consider you are making that much interest for yourself each time you reduce the principal. Overall good thinking in your part. Credit Card are the evil of our times in finance. Did you watch the hearings on CSpan this past week where the CEOs of the biggies were grilled by members of Congress? Good Luck

Answer 5

Congratulations on chopping up the credit card. That's a huge first step. If you have a steady and secure job, keep paying off that debt as much as possible. If the job situation is shaky, keep some of it in savings for an emergency. Just keep working on paying off that debt. You work too hard for your money to give a big chunk of it to a greedy credit card company with their outlandish rates. Don't fall into the trap of paying it off later, even if interest free.

Answer 6

If you can draw more interest on savings than you'll be paying
on the cc (%) then go for the savings, otherwise, would
suggest you get that cc taken care and don't use them any-
more.

However if the interest rate isn't entering into the equation
on the cc, you'll be better off gaining interest on your savings
if you don't need the cash for awhile you may even consider a CD

Answer 7

Continue to add to your savings while paying on the debt.