Save money or pay down debt?

[flash]

Re: Save money or pay down debt?

It's important to note, most cc's have "universal default" now. If for any reason, you are late on ANY bill, they will raise your rate - often to 29%. And if it was reported in error, good luck getting them to lower it back.

There is also a new law, I'm sure someone has more expertise on this than I do, but if you are late with one creditor, they can report it and ALL your creditors can raise your rates. As I recall it's because your risk goes up. Anyway, something to think about.

[flash]

Re: Save money or pay down debt?

Okay thanks very much for the advice. I double checked on the 1.9 rate on the cc and that is good until November 2006. It changes if I'm late on my payment, but I can make sure that doesn't ever happen.

I have been doing a bit of saving and mostly putting money on the cc. I really hate having debt hanging over my head. However, I think I will focus more on my savings for now just so that we have some security. I've always had it in my head that if something ever happened, we would just use our credit cards.

The debt owing on the cc is just under $3000 and this is the only card that we owe on.

First, if you are charging on a cc while putting money into a savings account, no matter how low the rate, you aren't really SAVING. Don't allow yourself to get into that mind set.

If you had a large savings to invest, there would be some advantages into investing in a higher yield short term CD, 6 - 9 months, then paying off the credit cards and claiming a profit. But, it doesn't sound like this is your situation.

Second, you can't count on the credit card to be there if something happens if you have already used up the credit line. You didn't say what your limit was, but with $3K already on it, how long could you live off of the limit, and what savings do you have to make the monthly payments?

I understand the need for security. Been there.

If it's possible, consider breaking down the $3K into steady payments, not minimum. If you have until November, that's what, 8 - 9 payments? So, $400 a month EVERY month would pay it down and off before the rate increases. Any money you have OVER that amount, put into savings. Then you will be paid off AND have some savings?

What do you think?

[Lostsoul33]

Re: Save money or pay down debt?

Okay, I'll answer your questions here. First off, I'm not using the credit card at all. It is actually hidden in the basement and nobody uses it. Our goal is to be free of any credit card debt. I just have always had the mindset that if something was to happen and we needed money, I would go to the credit card. It's an easy solution but one that puts you in a bad situation. However, our EF is almost non existant right now so I really don't know what other option we would have. I'm talking if hubby lost his job and there was zero income coming into the house.
Oh, the credit limit on this card is $7000. To be honest, I pry have $50,000 available credit just sitting on my credit cards. I'm glad that I only owe $3000. At times, that amount feels bad enough.
You used the figure of $400 a month. That is feasible to put towards the cc but then the savings would be nonexistant. So basically, we have $400 which needs to be split up between our EF and our credit card. I'm still kinda stuck on doing both but more will go towards my savings for the moment. As for the credit card, I'm thinking that I will do $20 over the minimum. What do you think?

[flash]

Re: Save money or pay down debt?

Well, 2% finance is not bad, and it sounds like you've got a great handle on things. I guess the real question is what are you going to do when the interest grace period is up? Will you have enough in savings to pay it off, or start making up ground then, so you don't get caught in the interest payments? I have no idea what your final interest rate is, but I'd plan ahead for that.

DH tied up too much of our money in an investment without looking at the budget, so I'm also letting something ride on a 2% cc until the investment comes to term and we have liquid assets again. Then I'll pay it off with the profit. Not how I like to do things, but it's where we are.

[Lostsoul33]

Re: Save money or pay down debt?

The interest of 1.9 ends in November. After that, it jumps to almost 19%. Yikes! I thinking that just before November, hubby and I will sit down and figure out how much we can put towards the credit card from our savings. I'm hoping to be close to paying this off by November but maybe that's just a dream. If we can't pay it off, we should be close to it and at that time, we'll put as much as possible towards it so we can be done with it. I'll also look around for a lower interest card if the need be. I have enough of them in my basement. LOL
Also, I usally get atleast $1000 back in Income Tax and I plan on having a garage sale. So..that would be around $1200 to put on the card. That's just a guess ofcourse.
So that's my plan. Think it sounds okay?

[Ima saver]

Re: Save money or pay down debt?

I think it sounds pretty good. I am worried that your EF is almost nothing, you need to build that up right away, so you won't have to use your credit card in an emergency! Look around for a card with a lower rate that you can transfer to when the 1.9 rate is up.

[Lostsoul33]

Re: Save money or pay down debt?

Thanks Ima Saver. I definetely agree with everything you've said.

[flash]

Re: Save money or pay down debt?

At $20 a month it won't be easy. But it's doable, you just need a plan. And think about what you CAN handle after the interest hits. $1500 has less interest than $3000! Maybe that is more doable, even $100 a month.

Check the fine print on the cc. I did a transfer at 2%, and found out when the transfer was processed that I would receive a $75 penalty if I retransferred before the 6 months, and that they would apply the full rate of interest! Yikes! I had hoped to retransfer it to a 0%, just because it's better, but the terms of the deal took care of that!

Hopefully you have better terms than that!

And take advantage of some of the deals out there. This site has freebies, coupons, tons of FREE advice . If you are comfortable with it, there are current 4 or 5 offers for free $20 gas cards with a $1 trial membership to different things. Selling on eBay is great. Check out the $20 challenge forum, people post all kinds of ways to earn additional income.

Too much advice. Really, as long as you are AWARE of the bills, interest, savings, etc., it's easier to stay out of trouble. It's when you AREN'T thinking about it that it turns around and bites you!

[Lostsoul33]

Re: Save money or pay down debt?

Thanks very much for the heads up on the cc transfer. I will keep that in mind for sure.
I have browsed through the $20 challenge and it is very inspiring and has given me some great ideas. It has also got me thinking that I might start selling on ebay.
Unfortunately, the freebies here won't do me much good as I'm a Canadian. I do belong to a few Canadian forums for the freebies so I get as much as I can there. I'm jealous of the Americans though as they can get a lot more free stuff than us Canadians.
Even with being Canadian, I still find this site to be very beneficial and I am able to get a lot out of it. Thanks everyone for all of your help. It is appreciated and I spend a lot of time here. I might not post a lot but I do read here on a daily basis.

[flash]

Re: Save money or pay down debt?

Interesting. I'm constantly running into offers that are Canadian only! Are you on the mailing list for SC Johnson Canada or other home product offers? Purina, Biotene, etc.?

It's difficult for me to access and post some of the Canadian links, because I don't have a Canadian address. But, if you point me in the right directions for the kinds of offers/coupons/freebies you want, or sites you use, I'll check it out and see if we can't get more posted here!

[Ima saver]

Re: Save money or pay down debt?

Can I ask, what is your minimum payment on your credit card?