How much of EF do I use to pay CC debt?

[everyfrog]

My CC debt currently is $4800, at 0% but that is about to expire and hike up.

My EF is $9200, which gives me 4.5 months of living expenses if I lost my job tomorrow.

I'm wondering how much of my EF should I use to erase/pay down my debt.

Options:

Pay it all off, leaving me with $4400 (2 months of living expenses)

Pay down CC debt just enough that leaves me with 3 months worth of living expenses in the EF.

The latter leaves me with basically $2,500 in debt. I can continue paying the $500/month toward it (like I am now) to pay it off sooner or transfer to a 0% card and pay less per month but way before the 0% period is up (stick that card in the freezer too and continue to work on living on my budget and not keeping the CC in my wallet for "emergency purposes").

I've compared bank cards vs. credit union cards and balance transfer fees and it'd be cheaper to go with a bank card.

[disneysteve]

My CC debt currently is $4800, at 0% but that is about to expire and hike up.

My EF is $9200, which gives me 4.5 months of living expenses if I lost my job tomorrow.

I'm wondering how much of my EF should I use to erase/pay down my debt.

Options:

Pay it all off, leaving me with $4400 (2 months of living expenses)

I can continue paying the $500/month toward it (like I am now)

I would go with this option. Pay it off in full and keep the 2-month EF. Then use the $500/month to rebuild your EF.

Remember, when your debt is gone, your monthly expenses are lower so your existing EF will stretch a little farther.

[kork13]

I would go with this option. Pay it off in full and keep the 2-month EF. Then use the $500/month to rebuild your EF.

Remember, when your debt is gone, your monthly expenses are lower so your existing EF will stretch a little farther.

I agree. Just be sure to build up that EF to a sufficient level to prevent you from needing to go into CC debt again... Or if the problem lies in controlling your spending, take steps to do that. But for the present, paying off the debt & funneling those CC payments back into your EF is likely going to be your best option for now.

[dczech09]

I would absolutely pay off the credit card debt. You are justified in feeling a little hesitation in doing so, but paying off the debt is a very good move (especially considering that your 0% ends soon).

I would pay it off, then rebuild the emergency fund. With out any credit card payments, this should be a pretty quick process.

Once you have the debt cleared up, do not let it build up again! Anything that you charge on the credit card should be paid off right away in order to avoid interest.

[everyfrog]

Thanks all!

More number crunching showed that I can stretch my EF funds than I thought, so paying $4800 right now still gives me 2.5 - 3 months of EF if I pay the debt in full right now.

PLUS after paying the CC debt, I will essentially have $1,000 MONTHLY to throw back in to my EF/house repair accounts! So I'll earn back my EF by JULY AND reach my six month EF goal by August.

Then I can start putting more $$ toward my Big House Repair/Backyard Remodel in September and start making double payments on my car, thus bringing my car payments down from four years to two years.

With my budget and a little more breathing room with available cash to stash away, I have absolutely NO REASON to put anything on a credit card!

WHOOT WHOOOT!

[mholl95]

Also keep in mind that jumping from one 0% credit card to another can hurt your credit score if you do this too often.

Cheers
michael

[JoeP]

Since you will be seeing "new income" not being targeted toward your CC, this is also a good time for you to see if there are additional expenses you can trim: get a fresh car insurance quote, if you have life insurance make sure it is term, see about getting a cheaper cell phone plan, consider dropping pay TV, etc.

You can really accelerate your savings with a few adjustments.