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Right now I have about 3k left in credit card debt which I've been steadily paying off. I could probably have it paid off completely in about 6 months to a year. However, I already have over 4k in my savings account. Would there be any benefit to paying it off all at once now, or does it usually make more sense to continue to pay it off incrementally?

Sprinkles
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4 Answers4

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If I were you, I would pay it off today.

Paying it off will still leave you with $1,000 in your account, which is a nice beginner emergency fund. After you pay off the credit card, use the money you had been throwing at the credit card each month to add to your emergency fund. In 6 months, you'll be back to where you are now, but with no debt, and you will have avoided 6 months of interest charges.

See "Oversimplify it for me: the correct order of investing" for more details and advice.

Community
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Ben Miller
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The missing piece: what is the savings account for? Is it earmarked for something in particular, or is it just money you haven't spent?

Paying off the 3k balance immediately will save you money. Go look at your credit statement and look and see how much it's costing you in interest every month you continue to not pay it off. Certainly it's costing more in interest than the bank is paying in interest.

The exception is 0% interest. If somehow you manage to not be paying interest, and that deal is still in place, then MAYBE it's better to hold onto the cash for a rainy day. Even then, paying off the stupid bill and not having to worry about it does have benefits.

Michael
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It makes no sense for you to be paying it off incrementally, as you are constantly being charged interest on the amount that you owe. Paying it off immediately would get rid of further interest charges, thus giving you a lower total payment.

Ranma344
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well, if your living expenses can be covered for 6 months with 1k, then yes, I would suggest that, if not then I will suggest getting 2k in advance to lower your monthly interest and do monthly payments ton that 1k outstanding.

you should not only have 4k in saving you should keep at least 6 months worth of regular living yes 1/2 of your year salary!!

Allan
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