Paying Yourself vs. Paying Credit Cards

[vince]

Hi all

There is some good advice here I just joined. I too have an automatic savings plan where they take the money right out of my checking acount every 2 weeks. I have two credit cards being paid every week because I have it set up that each week rotates. xxx to discover this week xxx to visa the next week. I find it that this lowers my average daily balance instead of sending in a payment once a month.

The best part is the first payment a month covers the minimum payment so you never get hit with those 24% interest charges. If anyone is paying that its just crazy. I call the cc comapnies and got my rate down a lot.
Vinny

[claricem75]

Thanks for this post, I found it to be extremely helpful as I am suffering in a similar situation.

Clarice

[vince]

I figure the lower the daily balance is the better off you are. I had 4 credit cards and have eliminated one this way already.
Good Luck Vince

[lisasayzhi]

Originally Posted by Amy752

Should I really start saving when I'll only be getting 3% interest, or should I put all extra money towards the cards, when they're socking me at 14 and 24 percent interest?

I was wondering something along the same lines... However, I have no CC debt, but I do have student loan debt. My ING account did have a higher interest rate than my Loan, but now, the rates went up on student loans. No, I didn't consolidate because my 3 other loans all have subsidized interest (where the Gov't pays the interest until I graduate) and I didn't see a reason to start accruing interst on loans that were staying put at the moment. I believe the interest rate on my student loan went up a little over 5%. My current balance on that loan is $2,748.73. My ING account is at $942.78 and earning 3% interest. Right now, I have my ING account set up to directly transfer $7 a week from my checking into my savings account. Should I keep it that way or pay around $30 a month into the loan instead? Thanks for any advice on this.

[terry1156]

Originally Posted by lisasayzhi

I was wondering something along the same lines... However, I have no CC debt, but I do have student loan debt. My ING account did have a higher interest rate than my Loan, but now, the rates went up on student loans. No, I didn't consolidate because my 3 other loans all have subsidized interest (where the Gov't pays the interest until I graduate) and I didn't see a reason to start accruing interst on loans that were staying put at the moment. I believe the interest rate on my student loan went up a little over 5%. My current balance on that loan is $2,748.73. My ING account is at $942.78 and earning 3% interest. Right now, I have my ING account set up to directly transfer $7 a week from my checking into my savings account. Should I keep it that way or pay around $30 a month into the loan instead? Thanks for any advice on this.

When the ING account interest rate was higher, if made sense to pay off as little of the loan as possible since you were earning money with the difference in ING. Now that the student loan is higher, it makes sense to pay off the loan rather than keep the money in ING. I would up the transfer to $30 or more if comforatable.

[baselle]

The discussion has been good so far - but mostly tilted toward getting that debt down by any means necessary. That's important, but let me argue toward savings just a little bit, and its more than money...its forming habits.

I think its important to have a bit of savings (about a $1000) before you do the heavy duty pay-down-the-debt. Psychologically you need a cushion not only because things happen, but because its important when you are building good habits that you avoid bad habits. Dipping into your debt to get by only reinforces a bad habit; dipping into your savings encourages you to save a little bit more because you're thinking "Whew! I'm glad I had this."

I think it is also important to save a little bit even while you are paying off the debt, but just a little. The worst case scenario is having $10,000 in savings and $10,000 in debt! Again its a case of habit. Fiscal responsibility is more than just getting your debt down, its what you do after you pay off your cards. You need a good savings habit in place to pursue your goals; you get the habit by doing it and doing it through thick and thin.

[terry1156]

I think it really depends on what is right for the person. As I mentioned in <A HREF="http://www.savingadvice.com/forums/showthread.php?p=18153">another thread</A>, trying to have savings while having credit card debt was actually costing me more money. People view money in very different ways and it's important to know which method will work best for you.

[Tree0164]

Lisa
I would get the ING account to $1000. (Also remember when you need money in the spring as you did this past year-I am sure that you don't want to get totally stressed again) Then I would focus a gazelle intensity on getting the loan paid off.

[lisasayzhi]

Originally Posted by Tree0164

Lisa
I would get the ING account to $1000. (Also remember when you need money in the spring as you did this past year-I am sure that you don't want to get totally stressed again) Then I would focus a gazelle intensity on getting the loan paid off.

Yeah, I think that's a good idea... and I only have a little under $60 to get it up to $1000. I may slightly increase my weekly transfer since my checking account isn't hurting at all. That way, I can get my savings account up faster, and be prepared to make a bigger payment onto the loan each month. Thanks for the advice!

[vince]

I would also agree that keeping 1000 in the ING account does something to your mindset. It also prepares you to not be in credit card debt or any debt for that matter.