What would you do?

BPASWA · #1 (**permalink**) 03-19-2008, 03:38 PM

What to do.. I have a CC with a $5000.00 balance. 4.99% I have a High interest savings account earning 5.4% with good amount of money in it. Do I go ahead and pay off the CC or do I leave it be, and continue to pay the minimums or a little more. I'm going to be in the market for a new house so I want to have as much $$$ as I can at my disposal. My credit score is already in the high 700 So by me paying the CC might not really gain me to much. So if any of you folks have some thoughts or ideas please feel free to let me know what you would do.

Thank you

project15 · #2 (**permalink**) 03-19-2008, 03:53 PM

Does your high interest savings account really still earn 5.4%? The rates on those have been dropping significantly and quickly over the past few months.

Anyways, if it's really still at 5.4%, you should pay the CC because you have to pay 2% worth of tax on that rate, which brings your total interest to 3.4% - less than that 4.99% that you're paying.

As toward the house purchase, yes you'll need cash, and a lot of it. Probably 10% down on whatever house you decide to buy. I would still pay off that 4.99% and wait a little longer on the house if necessary.

BPASWA · #3 (**permalink**) 03-19-2008, 04:03 PM

Yes, as of last week it was @ 5.4% fixed. However the bank did send me a letter stating it was no longer going to be a fixed account going to a var. account. So your right on that. Yes I did notice I took a little hit on my taxes. I guess I'll be paying that CC off. Thanks a lot for your input.

maat55 · #4 (**permalink**) 03-19-2008, 05:38 PM

Payoff the CC and only use it when you can PIF.

huffydeb2003 · #5 (**permalink**) 03-19-2008, 08:09 PM

I would pay off the CC.

veronak · #6 (**permalink**) 03-23-2008, 05:47 PM

I say pay off the cc even if you are earning more on the savings account in the end your paying more on the cc than intended...good luck

Brokemofo · #7 (**permalink**) 03-23-2008, 08:05 PM

Pay off the credit card! Your credit score will go up too, so that when you go to buy the home you will get a better rate.

dardhel · #8 (**permalink**) 03-24-2008, 07:01 PM

Taxes always sneak up on you in some way or form...

CreditExpert · #9 (**permalink**) 04-16-2008, 03:48 AM

pay off the credit card! it will be a lot better over the long run

LuxLiving · #10 (**permalink**) 04-16-2008, 04:46 AM

Wait just a sec, what does the money in the savings represent? Is it your emergency fund? What's your financial situation, are you working and able to quickly replace the $5000 back into savings or will it take you a long time to earn that amount again? Will taking the $5000 out of savings significantly reduce your savings, meaning does it come close to wiping you out? I would want to keep something back for emergency usage.

But, if you still have sufficient back up $$'s then I'd go ahead and pay off the CC.

InDebtInDC · #11 (**permalink**) 04-16-2008, 09:39 AM

Quote:

Originally Posted by Brokemofo

Pay off the credit card! Your credit score will go up too

Please provide proof to support your statement.

noppenbd · #12 (**permalink**) 04-16-2008, 09:55 AM

Bankrate.com has a FICO calculator which was created by Fair Isaac.

Credit Score Calculator | Improve FICO Score

I tried putting in the following: 1 credit card, opened 5 yrs ago, no mortgage, no applications in last 6 months, balance of $5K, representing 50-70% of limit, no delinquencies. Score range was 650-700. Then I changed the balance to $0, representing 0% of limit, and keeping everything else the same, and score range went to 730-780.

That seems like proof to me that paying off a $5K balance that represents over 50% of the limit will raise your credit score 80 points or so.

InDebtInDC · #13 (**permalink**) 04-17-2008, 03:36 PM

Do you have any proof that the calculator is nothing more than a random number generator?

LivingAlmostLarge · #14 (**permalink**) 04-17-2008, 04:16 PM

What is the debt from? What is the EF from? I would not pay off debt, you should pay it off. Lesson learned. Not taking the easy way out and just paying off debt. You might run it up again.

click4credit · #15 (**permalink**) 04-20-2008, 08:13 PM

As the tips above say, you are not really earning 5.4% with your saving account, you would need to work out the earning after tax. If you were paying 30% tax on the earnings then the real rate your are earning would be 3.78%. This is just an example but shows why paying off the credit card is best in your situation.

Brokemofo · #16 (**permalink**) 04-20-2008, 08:41 PM

Quote:

Originally Posted by InDebtInDC

Please provide proof to support your statement.

Proof to support my statement? Well, how about you just trust the word of someone who has been reading credit reports for over 15 years. Don't feel like proving anything. This is not a court of law. I have an idea. Why don't you prove my statement wrong?

Look, it's a well known fact that the lower your balances on revolving accounts the higher your credit score will be.

maat55 · #17 (**permalink**) 04-20-2008, 09:31 PM

I'm confused as to why so many people worship oh Fico God. I have no idea what my credit score is and don't care. I carry two CC's for gas purchases and PIF, then a mortgage I pay on time, and that's it. I'll bet anyone a dollar, I could sell my house and buy another one at the best rate available. I bet anyone a dollar I can get a loan on a car at the best rate available also, except I pay cash for cars now.

Just my, WHY THE HELL DO YOU CARE ABOUT FICO rant. Good money management, will beat fico any day of the week.

Brokemofo · #18 (**permalink**) 04-21-2008, 08:14 AM

Quote:

Originally Posted by maat55

I'm confused as to why so many people worship oh Fico God. I have no idea what my credit score is and don't care. I carry two CC's for gas purchases and PIF, then a mortgage I pay on time, and that's it. I'll bet anyone a dollar, I could sell my house and buy another one at the best rate available. I bet anyone a dollar I can get a loan on a car at the best rate available also, except I pay cash for cars now.

Just my, WHY THE HELL DO YOU CARE ABOUT FICO rant. Good money management, will beat fico any day of the week.

Obviously, but the people who are most concerned are not like you. If they had a score like yours, they wouldn't be worried either.

noppenbd · #19 (**permalink**) 04-21-2008, 08:42 AM

Quote:

Originally Posted by InDebtInDC

Do you have any proof that the calculator is nothing more than a random number generator?

Well maybe not proof, but the calculator was created by Fair Isaac, who are the owners of the FICO formula. No, they are not going to give out the exact number, but I see no reason why they would lie about a range of numbers.

noppenbd · #20 (**permalink**) 04-21-2008, 08:47 AM

Quote:

Originally Posted by maat55

I'm confused as to why so many people worship oh Fico God. I have no idea what my credit score is and don't care. I carry two CC's for gas purchases and PIF, then a mortgage I pay on time, and that's it. I'll bet anyone a dollar, I could sell my house and buy another one at the best rate available. I bet anyone a dollar I can get a loan on a car at the best rate available also, except I pay cash for cars now.

Just my, WHY THE HELL DO YOU CARE ABOUT FICO rant. Good money management, will beat fico any day of the week.

True, but the poster was asking about whether or not to take savings to pay off a credit card. There are many reasons why this is a good move, and FICO score is only one such reason. I don't worship the credit score but it is a fact of life in our society so it should be taken into account when making financial decisions. In this case it happens to be on the same side as you (paying off debt), so I'm not sure what you are arguing against.