pay off creditcard or add to savings?
I have a credit card bal of 6K$ @ 7.9%.
Monthly, should I pay the card 500$ or 300$ and put 200$ to savings. Savings account ballance is 600$
I have a credit card bal of 6K$ @ 7.9%.
Monthly, should I pay the card 500$ or 300$ and put 200$ to savings. Savings account ballance is 600$
Anonymous
Favorite Answer
Pay the minimums to stay current, and save up an emergency fund of $1,000 (including the $600 you have now)
Then attack the cards with every dime you can squeeze out of your budget.
During your attack, you will use the $1,000 as your reserve, and not borrow another dime, even if the transmission breaks.
Mathematically, it may not make sense, but if you followed the mathematics, you wouldn't have gotten a credit card in the first place.
Anonymous
You should start off paying as much as possible toward the credit card. It's smart to add a little to savings each month, but until the credit card is paid down, you are losing more money by putting it into savings.
If you would like to stay in the habit of adding SOMETHING to savings, limit it to about $50/mo and put the rest on the card until the card is paid down.
STEVEN F
Paying on the card is mathematically equal to earning 7.9% AFTER tax on your savings. You are probably making less than 1/4 of that amount on your savings account. Is there any question which is better? once the card is paid off, you can use the payment you no longer have to built your savings.
Wizkid!
Pay the credit card as it is doubtful that you will earn more than 7.9% interest on savings.
Angie
Put as much as you can against the credit card. Provided that the interest rate you are earning on your savings is less than 7.9%. (I'm guessing it is.)