Paying Off Credit Card Debt vs Building An Emergency Fund

[Aleta]

There are still some items that you need cash for. If you have kids and they have school lunches, you need cash. There are things that you buy that can only be done with cash. Sometimes you can't get to a bank. I live in Florida and if you don't have cash around during Hurricane season, you'll be out of luck. The only thing that they take is cash. ATM's don't work or too many people take money out and the ATM runs out. YOU NEED CASH and you need an Emergency account. My husband is self-employed and has to have more emergency cash than most people would.

[jIM_Ohio]

I never said "no cash"... understand the thread started by commenting on "pay down debt" or "hold cash"... in this situation, I strongly advocate paying down debt, holding close to zero cash. Why wait for an emergency which may or may not happen?

I am debt free and have 1 months cash on hand. The rest is "working" somewhere and might be tied up for 3-5 days while I get access to it. If I need to use it before 3-5 days, CC is my way to get it.

If I knew a hurricane is coming, I would have 3 days to get it.... Hurricanes don't just form overnight.

[Aleta]

jIM: I totally agree with you. We have often wondered why the same people go to Home Depot and buy plywood over and over again? You're right that you do have time, but unfortunately, even though you're prepared their are so many things to do. You have to gas up your car and cans and that is usually a long line. You need to pick up last minute items to last a couple of weeks, preparing for maybe evacuation for your animals as well, maybe having to rent a hotel room if you're asked to evacuate, bringing in all of your property from outside, putting up shutters, calling and making sure that your friends and family all have a place to go for. As you can tell by my response that money isn't your only concern during an oncoming hurricane.

[cantretire]

Cash advance at 20%???? No way. I'll keep the emergency cash fund.

[jIM_Ohio]

Originally Posted by cantretire

Cash advance at 20%???? No way. I'll keep the emergency cash fund.

I pay 0-9% for my advances. In an emergency, not an issue. It will be paid off quickly with cash flow from other sources.

We have close to $1100/month liquid cash in our budget. We contribute this to an IRA, and could easily stop one months payment to pay the bill on the CC.

[loanstar]

I'd favour paying of the the debt simply because by paying back that money into the credit card, it would still be available, should you need to borrow it again. on the other hand, keeping it in an emergency fund costs you, i.e. interest charged as well as the debt reflecting badly on your credit rating.

[s.jenkins]

do they have to be mutually exclusive, though?

[fruitbowlk]

I have choosen to save money in my EF and pay off my cc debt. I'm no longer able to use the card and refuse to get another one so I need some money saved up if something happens. Ex. Last Dec my car broke down and I have no cc's and I had no money saved up I had to wait a week to get paid and get my car fixed. That was a pain We have two different location that we have to be at and one location is further than the other. I only have one cc debt that is 4600 and I'm saving up 1000 to cover emergencies then I'm going to go full force and pay off my cc debt. Hopefully within a year or a year in a half.

[nextel500]

Originally Posted by fruitbowlk

I have choosen to save money in my EF and pay off my cc debt. I'm no longer able to use the card and refuse to get another one so I need some money saved up if something happens. Ex. Last Dec my car broke down and I have no cc's and I had no money saved up I had to wait a week to get paid and get my car fixed. That was a pain We have two different location that we have to be at and one location is further than the other. I only have one cc debt that is 4600 and I'm saving up 1000 to cover emergencies then I'm going to go full force and pay off my cc debt. Hopefully within a year or a year in a half.

i agree with your statement, but if you have debt I think it is best to pay down debt, however, it depends what the APR is vs the APY in your savings account or money market or whatever investment vehicle you are using.

[debtconsole]

This has always been my thought. We started aggressively paying off the cc and said "savings can wait". It was a gamble and when DH lost his job, we did have to put more debt on the cc's (again), but I think we came out better in the long run.