BOARDPARADISE

Is it better to maintain some sort of savings account and slowly pay off credit card debt or just wipe out savings and pay off the debt and just start over fresh with both back at 0? The interest rate is 10% on the credit card, and I owe about 1800 on it.

s2000Junky

Depends on your overall circumstance. But for myself, I hold some debt, but ive taken advantage of some interest free transfers so there is no interest. I do put away what I can for savings, wile paying the no interest debt balance off in the meantime, with the goal to have debt paid off at the expiration of 0 interest. Some will say to pay off all debt first before saving, and others will say that they feel more comfortable having some savings n hand, even if they hold debt, so this is where you have to decide your comfort level. Obviously if there is an emergency and you need to pull from your savings, you have it interest free. Whether as if you have no savings and have to pull form a credit card, then you are accruing more debt. How lucky do you feel? lol $1800 isn't much no matter what you do.

Id look for a balance transfer option if you can get one. Then you can have a savings now. Be net + essentially. If your not eligible, then you have to decide.

haga888

When you're talking cheap debt vs savings it's something to consider. But 10% isn't cheap. You're earning maybe 2% on a savings account (in Canada anyways) so really savings is costing you 8%. Versus paying off debt saves you 10%. That's the way I'd look at it anyways. You should use your credit card as your emergency fund where it costs you zero until you need it. If you still have expensive debt anyways.

BOARDPARADISE

Thanks guys for all of the advice, I know its not a whole lot of debt, I am just trying to learn to manage my money better and put myself in a situation where I do not have to keep using credit cards. I think what I will do is hold on to my savings and see what I get back from uncle sam from taxes and then use that to pay down the debt and hopefully be able to save as much as I can.

GOGPWS2K

just save enough money to last you about 6 months. Then pay off debts. Then save for the future. 401k is your friend.

hirev

simple rule"reduction of debt=savings and retirement win.

Thrilla

Chuck S

You need what I call "rotating debt" to produce a good credit rating for the times you do need to finance something like your first house. House mortgage interest is still tax deductible in the US. Using your credit card and paying the balance on time every time is a starting point. A debit card won't help build a credit score.

-- Chuck

Chibo

First, pay your debt off.

Buy everything on rewards credit cards set to auto pay balance, keep a monthly spend in your checking account, overflow the checking account into a high interest savings account for your 6 month emergency fund, overflow that into your Roth, then taxable brokerage account.

Just what I do, it works for me. Also, start tracking your monthly spend and be willing to cut things out. I am very debt adverse after screwing myself up in my early 20s.

S2020

interesting thread.
I had a big chunk of savings. Also had a equally big chunk of mortgage debt (Bay Area Housing is effing expensive).
Stock Market at all time high - worried about crash.
Sold it all, paid of mortgage. Slowly rebuilding saving.