Is it better to have 3 months of savings or pay down credit cards?

Question

I have always heard that you should have 3 months of pay in savings. I am trying to do this, but at the same time I am trying to pay down credit cards which is hard to do. Which is better to concentrate on the savings or paying off credit?

Answer 1

as long as you continue to pay the credit cards off, i would suggest putting some money away as a 'safety net' first, and after you have that socked away, start paying off more of the credit card charges.

Answer 2

Pay off cards first unless their rates are fixed at 5% or less!

You are probably earning around 5% on your savings and paying around 20% on your debt. If this is the case then you should work to pay off your cards first.

The point of having emergency savings is that you can deal with unexpected expenses without running up credit card debt--but you already have credit card debt. So focus on paying it down. That's the ultimate goal. If you happen to have a real emergency in the meantime, you can use your credit cards to get you through.

Answer 3

CJ, This is going to be a matter of opinion for most people and it should be decided taking into account all of your circumstances, including: current rate of pay, current budget and expenses, current liabilities (credit cards) as well as expected future endeavors (buying a new car/house).

I would personally recommend that you get between 3-6 months of savings first; then try and make large strides on paying down your credit card debts. For now just make the minimum payments on the cards. Some people call this 3-6 month cushion an emergency fund. I think it is prudent to have this in place first.

So, sounds like your on the right track.

Answer 4

with the availability of credit you can have 3 to 6 months of savings on the credit card....Pay the credit card off, why pay the interest then build your savings up!!!

Answer 5

Start with $1000.00 emergancy fund. Pay off the debt and then finish the emergancy fund with 3 to 6 months of exspenses.

Check out Daveramsey.com and listen to his radio show from the website or find a radio station near you to listen to. He has lots of good advice on money and debt.

Oh yea, cut up the cards. I had 5 or 6 cards that i used to carry. I cut em all up and canceled them and what a rush. freedom!

Answer 6

Pay off your cards and always ( every month ) pay them off!!!! Never make min. payments. Do not use them to live on. You are not paying off credit, but keeping credit!!

Answer 7

savings aren't meant to be spent...but if you are still paying credit cards, i would suggest paying off cards it just doens't make sense to have money in your savings while your spending all this money on interest and debts.

Answer 8

My opinion is to pay down credit cards.... they will eat you alive paying interest on the interest!!

Answer 9

3 months saving is meant to be an emergency reserve for hard times....Pay off your bills, if you run into hard times you can borrow 3 months worth of money.