How should I spend my Christmas bonus? Which will allow me to save more money in the long run?

Question

I am expecting to get around $1000 for my Christmas bonus.

I have two credit cards and a care credit card. One of the cards has a $200 balance and I have never not paid the balance in full when due. The other card has a $400 balance with 0% APR until July. The Care Credit Card has a $400 balance with interest deferred until February.

My car payment is $68, but I usually pay $75-100. I still owe $850 on my car. My car insurance premium (which is renewed in January) with full coverage will be $950 for 6 months. If I were to pay off my car and lower my coverage to liability it would be $450 for 6 months. I could then take the extra money and save it.

I know that if I have the bonus sitting in the bank I will just want to spend the money. However, if I were to pay off my car and save a little at a time I would be less likely to do so. I was thinking of opening a money market account to save the money a little along.

Which do I do, pay off my cards or pay of my car?

Answer 1

no brainier pay off the car and use the extra money from the insurance to start rainy day fund!!!

Answer 2

You're thinking very responsibly which is wonderful! Sounds like you have some great interest rates.
Most people will tell you to pay off one or the other but I'm not going to. I'm going to go out on a limb and say put it in something that will earn money. Like stock - the market makes an average of 10% over time - it's not every day you have a chance to put down a lump sum.
Or Real Estate Investing - In Denver there is a reputable group that allows you to invest with them for short periods of time (2wks to 3months at a time) and you earn 15%. You can find these groups in the phone book (call and interview them).

You could pay off your debt or you could earn compound interest over time .....think about it.

Answer 3

Personally, your debt and payments do not sound too high. I would continue to pay them off as you have been. I would take the 1000 and invest it somewhere. don't put it in a savings or checking accoutn where you will spend it, but open an IRA or other interest bearing account. that 1000 could wipe out an equal amount of debt, but it will be worth many times that when you are ready to retire.