There’s 714 dollars sitting in our Bank of America savings account. Part of me wants to pay this off and be done with credit card debt. The other part of me knows the whole point of an emergency fund is to have money available for life’s misfortunes.
Tricia over at Blogging Away Debt finds herself in a similar situation:
Credit Card Debt Update - It’s a Biggie!
Would you dip in to savings to be out of credit card debt? Or delay the gratification of being debt free?
HS
12 comments:
We paid off the last of our debt with our savings, but only because we knew we could repay it within the month. We saved ourselves the interest and have jacked up both our savings and our mortgage payments with the $ we normally used to pay down the debt.
Get that balance to 0. Just my 2 cents, perhaps worth less with the exchange. ;o)
What is the $10,000 + at HSBC for? If that's an Emergency Fund too, on top of the $714 at BofA, I'd probably just pay off the debt and be done with it... you'll still have $200 left in your account and you can start boosting your EF with the money you would have put towards debt repayment next month.
Good luck with your decision!
if you have no other emergency fund than the $714, what will happen if you have an emergency? Will you go right back to debt? Boost your emergency fund to at least $1,000, making minimum payments on the debt. Then once emergency fund is at $1,000 pay more on debt.
Can you sell anything or have a yard sale to boost debt payments?
Hope you have no emergencies anytime soon! -Becky R in NJ
I'd just pay it off, you can rebuild that $700 in no time, and if there's a genuine emergency, you always have the card to fall back on. Plus the $10K in the HSBC account it seems.
I would wait and keep the emergency fund. That way, you won't need to rely on credit if something happens.
Personally, I would pay this off. This isn't like draining a $3,000 emergency fund that will take months and months to rebuild. If there really is some big, unexpected, expense in the next month then you might use the card to pay part of it but if it's too much to pay off in a month or two then you'll probably end up using the card anyway.
And then focus for the next couple months to really build up that savings account. It would be different if the amounts were larger.
But your situation is your situation. Personally, I am putting about $800 a month towards my own debt repayment so this question seems obvious since that amount will be immediately back in the account the next month and would be an amount I would pay off in full if I did have to put it on the card.
How long would it take you to pay off the card without using the EF? I probably would pay it off. But I have enough of a snowball each month that could cover an emergency.
Thanks everyone for your comments, I'm still sitting here deciding what to do! I think I'm going to wait...
The 10k is from Hurricane Ike, we don't need that money...
HS
Credit Card Debt Update has some great information. What are your thoughts about using Direct Credit Solutions for credit card debt help.
Personally, I'd use the interest rates to decide this (if the numbers were bigger... your situation seems like a no brainer to me) If the interest you're PAYING on debt is more than the interest you're EARNING on money just sitting there, I'd pay it off, no matter the amount. Since yours is such a small amount, to me, no brainer, pay it off!
Good Luck with your decision!
Http://www.thefinancialblog.co.uk - Great idea for a blog and I like the way this IS personal. The thing with credit card debt is that you may as well get rid of it ASAP. There is no point having savings when you might be paying 18% APR interest on a credit card debt. Get rid of the credit card debt with your savings then continue saving. IF there are any emergencies you have to pay out for use your credit card as a last alternative. Hopefully by then you will have more emergency fund savings anyway...
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