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I recently paid a non-refundable housing deposit of $1,300 for summer intern housing. The company I am going to work at this summer has outlined in my contract that I will receive $2,500 to cover living expenses that will be paid out June. I paid for the housing deposit using a credit card but can afford to completely pay it off using money in my checking account. Would it make sense to:

  • Pay the card off in full (I have over 15,000 in checking currently)

  • Pay the minimum monthly dues on the credit card and then pay the debt off once my housing assistance from the company is deposited into my checking account.

  • Any other options or advice?

user94442
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5 Answers5

108

You are conflating issues.

You made a charge on a credit card. You have the money, earning near-zero interest, but are wondering whether you should use that money to pay a (presumably) high interest debt.

Of course, the answer is pay now. Most of the details beyond that are not relevant.

JoeTaxpayer
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If you have 15,000 in your checking account, you should see these two events (paying for house and getting money for internship) completely separated.

You pay your bill when it is due and no interest is charged (otherwise you'd pay more). Even if that leaves you with 10% less in your account, that's the cheapest way of doing it.

glglgl
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9

Pay the minimum monthly dues on the credit card and then pay the debt off once my housing assistance from the company is deposited into my checking account.

You're losing 2% (the inflation rate) on the checking account $15,000 , and losing 18+% APR on that $1500 CC balance every month you don't pay it off.

That's the guaranteed method of starting life in expensive, wasteful, unproductive debt.

The only fiscally prudent moves are:

  1. Pay off the CC debt now. No need to wait for the statement. Just log in to the CC web site and pay the bill.
  2. Move the unneeded portion of the remaining checking account balance into an online savings account so as to lose much less money to inflation.
  3. Even better is to move some of that money into a 12 month CD or two so as to break even with inflation.
RonJohn
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I always pay off my credit card (the full sum for that month) on the last day of 0% charges.

If you have the money to pay it off, it's wasteful to keep this debt and pay interest on it.

JoeTaxpayer
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Robert Andrzejuk
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What's your concern to paying it off, that it will "confuse numbers" since money is bouncing around everywhere? What's the amount of interest total you'll end up paying? If you're comfortable paying that much interest, then it doesn't matter either way. If you want to save the interest money, pay it off now. Also having high percentages on credit cards harms your credit score short term (but once you pay it off it goes back to normal IIRC). Unless your bank gives you some kind of bonus for maintaining a 15K balance...

rogerdpack
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