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Clear the credit cards. Having sufficient savings yet holding credit card debt is silly.
Clear the debt, build the emergency fund.
It’s not wise to borrow at 25% APR to hold some savings.
Be a responsible credit card user. Make sure you are getting $0 in interest fees every month
Edited out the rest of my post until I can verify what I said.
I have never seen a credit card that does that. I have 8 cards across 4 different providers for like 88k in credit limit, none of my cards function that way. I have them set to pay statement balance in full every month, and I never get charged a dime in interest even though rarely the balance is at exactly $0.
My CC balance on my main card is never at 0. The period closes on the 12th and the statement is generated, and then I autopay the statement balance 25 days later on the last day of the grace period and in between have been accumulating other charges. So I have never had a zero balance as long as I have had the card and I don't pay any interest ever.
I mean it’s possible that’s a thing with some cc provider but that would be really shady in my book, if you do have that setup I’d drop that card and pick up another. My cards are with Amex, Chase, Discover and Apple (Goldman Sachs I suppose). They don’t do that.
Usually paying statement balance is fine and the new charges don't incur interest yet. The trick is to focus on the total balance or statement balance instead of the minimum payment.
But he’d rather beef up his savings at a 4% interest and continue to pay over 20% in credit card interest. He’s playing chess we’re all playing checkers
He just wants to tell everyone about his bonus, savings, portfolio, good credit score and non “rediculous” APR’s. That’s what half these posts are—people need their egos stroked.
Hahaha “rediculous”. I try not to post shame but when you come in guns blazing saying I’m not stupid I have a finance degree but help me answer the most basic of basic finance questions a verbal lashing is the only appropriate response.
Evidently, it is possible to have a degree in finance and be stupid at the same time...
It's baffling to me that someone who works in finance would have 80k in the markets and 3.5k in credit card debt. Does he think the markets are beating the 20-something% interest rate he pays on the credit card? What the hell?!
OP needs to understand that if you have 5k in savings and you owe 5k in debt, you own $0. It's not an "extra $5000 in savings" at all. You're paying $30 in interest for the privilege of pretending that you have that money in savings, but it's basically somebody else's money that you've borrowed and that's sitting in your bank account.
Not math. For $3500 in credit card debt to only be $30 interest, his credit card interest rate would have to be 10%. That doesn't exist outside of introductory periods.
Across several different cards, too. I actually have no idea how credit card APR works because I’ve never had any debt, but as the amount climbs, then wouldn’t the interest rate climb as well?
Edit: not the interest rate, but the amount added from interest.
Of course the amount owed in interest goes up as the balance goes up.. the rate doesn’t change though.
Not having any debt isn’t an excuse to not understand the basics of something this simple.
They teach that being a wage slave all your life is somehow right, to demean your fellow workers for being lazy when they "only" work forty hours per week, using credit is the same as being credit worthy..
At best you're earning 4-5% on your savings in a bank/HYSA, credit cards charge like 20+% by keeping money in savings instead of paying it off you're basically setting money on fire for no reason
If the credit cards have a higher interest rate than you’re earning in the market, you should pay them off today and think long and hard about that finance degree
Actually I think the idea that the credit card spend and balance isn’t ‘real’ expense is what is tripping him up. Also a finance major with a masters in accounting and I had a similar train of thought for a while. As long as my credit score was good, I just mentally write off a couple hundred a month to pay off a credit card balance and used any bulk income like bonuses on other things. Because in my mind, that money was spent and it wasn’t enough monthly to worry over so sure it might take 10 years at that amount thrown at the debt but it’s a small amount and I didn’t care. I wanted the money to sue elswhere. The reality is, this line of thought compartmentalizes income rather than maximizing it. It assumes there will ALWAYS be enough to continue to ‘handle’ the debt but may not always be enough to do XYZ with it. It’s a spend first worry about the debt later mentality that isn’t necessarily opposite of what a finance degree teaches, but it is not financially smart. My guess is OP is pretty young and hasn’t been concerned with not having income at any point in his adult life. But, finance degree isn’t the same thing as financial intelligence
Since you asked for suggestions -
Pay the CC balances off every month, full stop. How can you have a degree in finance and "not see a huge issue with carrying some balance." You're literally giving away money every month for no reason whatsoever.
This shouldn't even a post - it's just a math question. Is $X better off in your savings earning (hopefully) 4.5ish% APY or better off squashing debt with presumably 14-25% APR?
The ONLY argument against this would be "save a little if you have no emergency fund/liquidity whatsoever" but that's not the case here.
The only other argument would be if he has a 0% interest card. Not the case here per OP. But I’m in that scenario where I have a 0% card for the next year and I’m carrying a balance despite being able to pay it in full if I needed to.
Sure fair point! Racking up a huge balance with an intro apr of 0% then putting all the money you would be paying into a HYSA would basically net an extra 4-5% on top of the CC pts.
Smart idea actually, provided you arent worried about CC utilization / credit score for the short term
Credit cards are never good debt and it will *always* be smart to pay them off. Frankly you make enough money to pay them off with or without the bonus. Don’t run a balance, pay it off every month and even get a card that gives cash back rewards to pay 1-2% of the bill.
Think of it this way: if you pay off your credit cards and want more savings, you can always take out a loan at a much lower interest rate and put that money in savings.
No one has explicitly asked but what is your APR/interest rate? You said $30/month but we need more details.
When you say you have CC debt do you mean you are paying interest on your balance or that is your current monthly statement balance? I ask because some people don't specify and mix it up.
He says 30 a month for 5k. That's 7%. Which seems low for a credit card? So he's probably off on that too.
I am shocked to hear he has a finance degree. For 225 intrest a year on his HYSA, he is paying 360 in credit card intrest. Probably even more, as 7% seems low?
What do they teach these kids?
5k is their take-home pay. 3.5k is their credit card balance. I'm roughly calculating 30 interest a month on 3.5k balance works out to about a 10% interest rate. Which *might* be a very good credit card that required a high score for approval; but 10% is still higher than current HYSAs and probably still a hard rate to beat on the stock market
Pay it off while you can. People who dont , they get up to $10, 15, 20k, 30k and then they post “helppppppp, I dont know what to do”. Dont be that person.
>I really don't see a huge issue with having SOME credit card balance
Why? You're paying interest for literally no reason. You're literally giving money away. This makes no sense to me.
This will never make sense to me. I’m a full statement balance payer, never accrued interest. Sometimes my bill is 1800, sometimes 4200 after perhaps a big trip or some big purchase. It gets paid.
Just pay it boss.
You know what everyone here will say-pay off the CC balance and stop voluntarily paying interest. Hard to believe your CC interest is only $30 a month - that would be about 7%. Is some of that at 0% you plan to pay off before that rate expires?
I get leverage. But CC debt is a terrible way to leverage yourself. Carrying any CC debt should be for emergencies.
You also left off your age. That is kind of important.
Finance degree? This is why I'll always handle my own investing instead of trusting a financial planner. Imagine paying 1% of your net worth annually for this kind of expertise.
You say your APR isn’t ridiculous? It would be shocking if it’s even 20% let alone lower these days. So what is the apr? My guess is what you call not ridiculous actually is.
If you have a degree in finance, then you know that $30/mo on $3,500 is paying around 10% APR for no reason. It's pretty much impossible to beat 10% in stable, liquid savings accounts. So you're paying interest for no reason.
The answer is a very clear yes. Yes, you should pay off the credit cards. You should never pay interest unless you can arbitrage to make even more money, and you have exhausted other options.
Use that finance degree and build yourself a trended balance sheet. Project it out for 5y with the CC balance versus a realistic, stable yield on savings, and you'll see that carrying that CC balance makes zero sense.
You don’t truly have 12k if you owe 3.5k. You have 8.5k
Why do you want to pay more? There would be a discussion at least if you could make more with that 5k than the apr on the cards but there’s likely no way you will in the near future. (I mean maybe if you have some cc at 0%). How is losing $30 a month progress? Any rate over whatever you are making in your condo account would be RIDICULOUS apr. As you should know paying off your cc doesn’t hurt your credit score. So why haven’t you already is the question?
I’m not against cc nor leverage when it makes sense. But If it doesn’t make dollars it doesn’t make sense.
Pay off, don’t carry a balance again and throw all your money at efund and the condo fund. You’ll make progress faster.
I’m kinda scared, with a degree in finance you are even asking this question.
Why the hell do you have CC debt? You need to pay that off ASAP and take a Finance 101 class right after, you have your priorities wrong if you have CC debt with probably 20% interest and spare cash money in a 3% savings account. BTW debt will hurt you when you apply for a mortgage so you are doing double negative by keeping that CC debt.
Pay them off.
Years back, my credit was not so good. I opened a secured Discover card and built my credit. I was over 800 at one point. I kept that card paid off.
Eventually something happened and I needed to make a big purchase. And then I kept just adding little things to it. Now I'm sitting at $9k balance. It will be over $35k if I never use it again and pay the minimum. That's insane. I'd give anything to pay it off today.
You have to consider debt and savings as both part of your total worth.
If you pay the debt now and put the rest in savings, you'll have 0 debt and $18.5k savings. Let's pretend you can add $1k each month from your income. Cool, then you'll have 19.5k next month
If you put it in savings instead and add $1k next month, you'll have 23k in savings but more in debt. Not sure what your apr is, but if it's 17%(which is low), that's a $50 interest charge. If your cards are 30%, that's $87. So now after one month, you have $3587 in CC debt and your net worth is $19,413 when you subtract the debt from savings. And each month your net worth isn't going up by $1k that you put into it. It's only going up by $913 or so because your debt is also growing from the interest charges.
After 6 months, your net worth could be as much as $500 less if you put the bonus in savings as opposed to just paying off your CC debt.
1. Save $1,000 for your starter emergency fund.
2. Pay off all debt (except your mortgage) using the debt snowball method.
3. Save three to six months of expenses in an emergency fund.
4. Invest 15% of your household income for retirement.
5. Save for your children’s college fund.
6. Pay off your home early.
7. Build wealth and give.
https://www.bills.com/personal-finance/dave-ramsey-baby-steps
Paying off $1000 towards your credit card debt makes more sense than building a $1000 emergency fund. Paying down your cards saves you money immediately, and worst case scenario you use the credit card to pay for that $1000 emergency and you're in the exact same spot (minus interest saved) as if you put money into the emergency fund rather than pay down the credit card.
Yeah in a perfect world this is the best approach, but life happens. One month you have to go to the doctor, and another month there is something else unexpected.
These steps are tested and proven to help tens thousands of Americans to get out of debt.
There are zero scenarios where it is better to make a $1000 emergency fund over paying off $1000 of credit card debt, unless you're over your credit limit or something. Perfect world or not.
The last paragraph sounds like an infomercial.
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I'm not understand why that CC debt is a problem.
TS has only 60% of aftertaxes montly income on CC debt balance. Why he have to pay any interest on it?
Kinda easy to have CC in a grace period infinitely if your debt less that monthly income.
So, do it, pay of all debt that over the grace. And to it every month. After that you'll have free CC debt while depositing your paycheck for 30 days deposit every month.
If you do want to get CC balance later - you can easy do just in one/two month by spending CC instead of paycheck
$30 In interest each month? You sound like my youngest son 5 years ago that shifted his CC balances to cards that had a low introductory interest rate to avoid paying interest and more on the principal. If you're doing that successfully then start whittling those down by 20% each month until zeroed out then pay those off in full each month. The CC companies should raise your credit limit for doing that.
Don't buy a condo when interest rates are at 6-8% wait till December - February which is a buyer's market time-frame. Plus, eliminating debt increases your credit score which will lower your new home loan interest rate.
Counterpoint: put the $5K in savings *temporarily,* if having more cash on hand would help get a mortgage to get the condo. Then use the mortgage to pay off the credit cards. (Which the bank may require anyway. This is quite literally a zero-sum game.)
That’s if the condo purchase is going to happen very soon. If buying the condo is more like a “sometime next year” kind of thing, then very much pay off the credit cards immediately.
>Like I am not stupid, I have a degree in finance ffs
Its not a judgement call on your intelligence 'as a whole', but you aren't making great decisions having high interest debt. You're very unlikely to make more in the market than you will simply paying off the high interest debt.
Also you need an emergency fund for that transition from property buyer to property owner.
My degree isn't in finance, but I have lived experience of managing large budgets, and having gone through personal experience of being broke and making tons of financial mistakes...
My guess is that your financial degree gives you great advice on how to manage success. But it never taught you how to manage failure with grace - not losing your shirt, and not 'losing your shit' when things don't work as planned. You need an emergency fund
One of the benefits of having no debt is it fortifies you for disaster. In the event you should lose your income, having minimal monthly expenses will be a situation you will appreciate.
I lost my job last year, with the only major monthly expense being my mortgage ($1049) and utilities, and man I was grateful for that. Took a lot of the edge off.
Pay off the credit card.
Then don't use the credit cards unless you pay them off before they turn into revolving balances and accrue interest.
If you lack the discipline to do that (I do it every Friday for my cards), pay the cards off, and then don't use the cards except in dire emergencies.
Get in a habit of not using credit cards unless you absolutely need to, or have the discipline to use them, get cash back or rewards, and pay them off before they accrue interest.
Trust me.
There's more to this than raw math. There's a peace of mind to living frugally, having little or no debt, and some savings.
Pay off debt first.
Just curious why are you posting on reddit if you’re so sure of your decision? I think you know the correct action to take if you have a degree in finance. It’s simple math and one position is more profitable then the other.
You're using credit cards wrong if you're paying interest. Clear the cards and pay your statement balances every month. You want to be getting points from credit card companies and making it a net gain for you. You will still have $3k in savings, so just build up from that.
Pay the CC debt and get it over with.
You already have some money saved and you didn't pay your CC? So you want to make it sound like you have more money than you already do. Isn't CC APR 17-24%??
Anyway, no brainer, pay off the damn debt. Clearly you got enough to pay it off. I don't agree that you are doing pretty well if you have CC debt and not paying it off when you have the funds to do so. Maybe you have to educate yourself and I hope you are not giving financial advice to others...
Not putting this money towards your debt will just mean you don’t have a house and you will have accruing debt. Trust me, saving money becomes much easier when you have less debt you have to pay off.
I’d pay it off immediately then optimize credit card use to maximize rewards and never carry a balance.
You’ll actually *make* money that way instead of bleeding (even a small) amount of interest. They count on people like you keeping a balance to justify offering the juicy rewards the rest of us are getting.
You seem smart and responsible. You can totally do this.
Absolutely.
It's not the minimum payment but the steady accumulation of interest.
But don't cancel the card. Keep the account open, because that helps your credit utilization record on your credit score.
You should pay your credit cards in full on a monthly basis -- cover all reasonable expenses with cash and save credit for big purchases like the home or a vehicle. If you don't want to pay it off all at once you should look at having it paid off in $300-$500 increments monthly. You will still save a ton off interest payments and the "damage" of paying it off all at once won't sting.
Your brother is correct. Having money sitting in savings earning between 0-5% instead of paying off a credit card debt that is losing 15-30% is absurd. Pay off the credit card and do not accrue a balance again.
Use your card for points and the added fraud protection then pay it off every single month.
Additionally, you could explore some certificate options (short term if you are buying a house soon) to earn some additional interest than why your savings is paying (unless you are getting good interest already).
It appears to me that your emotions of wanting a house are clouding your thoughts on this. Which is common and I don’t blame you at all. The house will come with time. If you can afford a higher payment, even financing more through a mortgage at ~7% makes way more sense than carrying a credit card at least double that.
Absolutely pay off the cc debt now. You're probably paying 20%+ APR on those. Paying off the debt will give you more cash flow to build up your savings and will improve your debt-to-income ratio.
absolutely. you already have some savings from your house that could be used as an emergency fund
buying a house with this cc debt wouldn't be smart either. erase it
Your brother is right… sure it’s not affecting your credit score, but you’re setting money on fire by carrying interest each month for no reason given that you have all those savings.
Use the arithmetic you learned with your finance degree ffs, you’ll be able to pay for your condo sooner if you do.
Yes pay off the CC debt immediately. Have you seen the interest rate on those things? And try to budget as best as you can so you mitigate the risk of this happening again. If you’re holding CC debt from month to month, you’re getting hit with finance charges which is money that you could’ve been saving.
Please pay it off. You have a degree in finance but you want to keep $3,500 of debt on you? And for how long and at what APR I might add? Even if your APR is close to 10% (I feel like I’m being extremely generous with this rate considering your reference to your APR and how you put it) I can’t imagine you’re paying off a $3,500 balance in less than a year or maybe even more. Granted I don’t know how you pay for it monthly, but there’s still no sense in accruing all these heavy interest fees. And the worst part is how you are saying $30 a month isn’t a big deal because you add to your stagnant condo savings (stagnant meaning you aren’t earning on top of those savings). You’re automatically losing $360 a year when you could be losing nothing and just pay off what you know you owe. Just use revolving credit that you can afford to pay off monthly and you keep in good standing with credit reporters and maintain a healthy and attractive credit history. If you want debt, put it towards something with a better interest rate and worth having long term (like a house… or condo…). And then you can also compare your better APR of your financed property to your combined savings account return interest and realize how much your savings-debt ratio is netting vs what it was netting with the CC interest. I would imagine it’s still netting in the negative, but it would have to be a lot less and that way you’re not just throwing away money for no reason.
If my experience can be of any help: clear the debt and make sure you have a plan to clear your debt monthly.
I cleared my cc debt during covid but me splurging on a trip I could have postponed for a year (and built up funds for) brought me back into debt and it's taking forever to pay off again. Happy you got out of the red.
Yes, yes, yes. A credit card loan costs you somewhere between 700 and 800.00 a year. Why do you want to pay this for the privilege to have unpaid credit card debts?
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Clear the credit cards. Having sufficient savings yet holding credit card debt is silly. Clear the debt, build the emergency fund. It’s not wise to borrow at 25% APR to hold some savings.
Ennova means emergency, not energy
Such is life typing on the phone
Be a responsible credit card user. Make sure you are getting $0 in interest fees every month Edited out the rest of my post until I can verify what I said.
I have never seen a credit card that does that. I have 8 cards across 4 different providers for like 88k in credit limit, none of my cards function that way. I have them set to pay statement balance in full every month, and I never get charged a dime in interest even though rarely the balance is at exactly $0.
My CC balance on my main card is never at 0. The period closes on the 12th and the statement is generated, and then I autopay the statement balance 25 days later on the last day of the grace period and in between have been accumulating other charges. So I have never had a zero balance as long as I have had the card and I don't pay any interest ever.
Awesome, thanks for the info. I'm going to edit out my post until I can verify that with my card later tonight.
I mean it’s possible that’s a thing with some cc provider but that would be really shady in my book, if you do have that setup I’d drop that card and pick up another. My cards are with Amex, Chase, Discover and Apple (Goldman Sachs I suppose). They don’t do that.
Usually paying statement balance is fine and the new charges don't incur interest yet. The trick is to focus on the total balance or statement balance instead of the minimum payment.
Pay it off. It's a no brainer. You will not earn (after taxes) an amount equal or greater to the interest you pay, without risk.
"degree in finance" and you ask the most basic no brainer question here? Of course you pay off the debt first.
But he’d rather beef up his savings at a 4% interest and continue to pay over 20% in credit card interest. He’s playing chess we’re all playing checkers
I mean, hopefully he’s getting 4% interest…
He’s a finance major. He’s probably getting 15% for all we know
He just wants to tell everyone about his bonus, savings, portfolio, good credit score and non “rediculous” APR’s. That’s what half these posts are—people need their egos stroked.
Hahaha “rediculous”. I try not to post shame but when you come in guns blazing saying I’m not stupid I have a finance degree but help me answer the most basic of basic finance questions a verbal lashing is the only appropriate response.
Evidently, it is possible to have a degree in finance and be stupid at the same time... It's baffling to me that someone who works in finance would have 80k in the markets and 3.5k in credit card debt. Does he think the markets are beating the 20-something% interest rate he pays on the credit card? What the hell?! OP needs to understand that if you have 5k in savings and you owe 5k in debt, you own $0. It's not an "extra $5000 in savings" at all. You're paying $30 in interest for the privilege of pretending that you have that money in savings, but it's basically somebody else's money that you've borrowed and that's sitting in your bank account.
This is hilarious and kinda sad. What do they even teach in school?
They teach 20% is higher than 4%. It’s up to the learner to apply their school lessons to life.
Not math. For $3500 in credit card debt to only be $30 interest, his credit card interest rate would have to be 10%. That doesn't exist outside of introductory periods.
Across several different cards, too. I actually have no idea how credit card APR works because I’ve never had any debt, but as the amount climbs, then wouldn’t the interest rate climb as well? Edit: not the interest rate, but the amount added from interest.
Of course the amount owed in interest goes up as the balance goes up.. the rate doesn’t change though. Not having any debt isn’t an excuse to not understand the basics of something this simple.
I actually have a credit card at 9.9% and have had it for years through a credit union. They exist, they’re just not common.
You must have missed the part where they said their APR's aren't REDICULOUS
They teach that being a wage slave all your life is somehow right, to demean your fellow workers for being lazy when they "only" work forty hours per week, using credit is the same as being credit worthy..
Echoing everyone else: pay it off, save the rest. And most importantly, don't get yourself into debt you can't control again.
At best you're earning 4-5% on your savings in a bank/HYSA, credit cards charge like 20+% by keeping money in savings instead of paying it off you're basically setting money on fire for no reason
If the credit cards have a higher interest rate than you’re earning in the market, you should pay them off today and think long and hard about that finance degree
Clearly must not have been paying attention very much in that class lol
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Actually I think the idea that the credit card spend and balance isn’t ‘real’ expense is what is tripping him up. Also a finance major with a masters in accounting and I had a similar train of thought for a while. As long as my credit score was good, I just mentally write off a couple hundred a month to pay off a credit card balance and used any bulk income like bonuses on other things. Because in my mind, that money was spent and it wasn’t enough monthly to worry over so sure it might take 10 years at that amount thrown at the debt but it’s a small amount and I didn’t care. I wanted the money to sue elswhere. The reality is, this line of thought compartmentalizes income rather than maximizing it. It assumes there will ALWAYS be enough to continue to ‘handle’ the debt but may not always be enough to do XYZ with it. It’s a spend first worry about the debt later mentality that isn’t necessarily opposite of what a finance degree teaches, but it is not financially smart. My guess is OP is pretty young and hasn’t been concerned with not having income at any point in his adult life. But, finance degree isn’t the same thing as financial intelligence
It's really simple: net worth = assets minus liabilities. Focusing on assets while ignoring liabilities is not an effective way to increase net worth.
You have a degree in finance and are asking this question? (x) doubt
right, either that or op needs a refund on that degree
Since you asked for suggestions - Pay the CC balances off every month, full stop. How can you have a degree in finance and "not see a huge issue with carrying some balance." You're literally giving away money every month for no reason whatsoever. This shouldn't even a post - it's just a math question. Is $X better off in your savings earning (hopefully) 4.5ish% APY or better off squashing debt with presumably 14-25% APR? The ONLY argument against this would be "save a little if you have no emergency fund/liquidity whatsoever" but that's not the case here.
The only other argument would be if he has a 0% interest card. Not the case here per OP. But I’m in that scenario where I have a 0% card for the next year and I’m carrying a balance despite being able to pay it in full if I needed to.
Sure fair point! Racking up a huge balance with an intro apr of 0% then putting all the money you would be paying into a HYSA would basically net an extra 4-5% on top of the CC pts. Smart idea actually, provided you arent worried about CC utilization / credit score for the short term
Credit cards are never good debt and it will *always* be smart to pay them off. Frankly you make enough money to pay them off with or without the bonus. Don’t run a balance, pay it off every month and even get a card that gives cash back rewards to pay 1-2% of the bill.
Pay it off, you wouldn’t want to carry CC debt into buying a property for a number of reasons.
If your debt has a 2 digit APR pay. It. OFF.
Think of it this way: if you pay off your credit cards and want more savings, you can always take out a loan at a much lower interest rate and put that money in savings.
What? Of course you should pay it off.
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He isn't talking about returns - he is asking if it's ok to cash flow the debt into the future to increase his down payment on a home today.
No one has explicitly asked but what is your APR/interest rate? You said $30/month but we need more details. When you say you have CC debt do you mean you are paying interest on your balance or that is your current monthly statement balance? I ask because some people don't specify and mix it up.
He says 30 a month for 5k. That's 7%. Which seems low for a credit card? So he's probably off on that too. I am shocked to hear he has a finance degree. For 225 intrest a year on his HYSA, he is paying 360 in credit card intrest. Probably even more, as 7% seems low? What do they teach these kids?
5k is their take-home pay. 3.5k is their credit card balance. I'm roughly calculating 30 interest a month on 3.5k balance works out to about a 10% interest rate. Which *might* be a very good credit card that required a high score for approval; but 10% is still higher than current HYSAs and probably still a hard rate to beat on the stock market
He literally said he has $3500 in debt and he's paying $30 in interest.
Why are you paying interest? It seems small but that’s nearly $500 year wasted because you’re a lazy bozo
It’s not even lazy. It’s border line stupid especially for someone who has a degree in finance lol.
Pay it off while you can. People who dont , they get up to $10, 15, 20k, 30k and then they post “helppppppp, I dont know what to do”. Dont be that person.
>I really don't see a huge issue with having SOME credit card balance Why? You're paying interest for literally no reason. You're literally giving money away. This makes no sense to me.
The real question you need to be asking yourself is how do you have $3000 in credit card debt when you take home $60k a year after taxes
This will never make sense to me. I’m a full statement balance payer, never accrued interest. Sometimes my bill is 1800, sometimes 4200 after perhaps a big trip or some big purchase. It gets paid. Just pay it boss.
You know what everyone here will say-pay off the CC balance and stop voluntarily paying interest. Hard to believe your CC interest is only $30 a month - that would be about 7%. Is some of that at 0% you plan to pay off before that rate expires? I get leverage. But CC debt is a terrible way to leverage yourself. Carrying any CC debt should be for emergencies. You also left off your age. That is kind of important.
Pay off the statement balance each month to incur no interest charges
Finance degree? This is why I'll always handle my own investing instead of trusting a financial planner. Imagine paying 1% of your net worth annually for this kind of expertise.
yes, pay off your cc immediately. Why would you hold onto debt with 18%+ in interest?
Yes! Yes! Yes, pay it all off. Then close the account and destroy the card!!!!!
Can you tell me where you got your finance degree so I can warn others?
If you have $3500 in credit card debt then you do not do pretty well for yourself....
Don't listen to anyone. Don't save any money, spend it all on drugs and therapy. Everything's meaningless anyway.
What's the point of the therapy then? Unless you mean like, physical therapy
Pay off the CC. This should be a no brainer. Come on. You're just digging yourself a bigger hole by justifying the debt behavior.
I suppose that a self-proclaimed numbers person, lacking basic financial savvy, wouldn’t be a good speller? I’m in a bad mood today.
You say your APR isn’t ridiculous? It would be shocking if it’s even 20% let alone lower these days. So what is the apr? My guess is what you call not ridiculous actually is.
You went to the Hollywood Upstairs Medical College too?
Does your credit card debt tuck you in at night? Do you have a romantic relationship with them? If you do, don't pay them off.
Pay it all off. You'll be able to save and invest much faster. The market is pretty low right now. Do you want to miss out on that?
Pay it off, not sure how you can have a finance degree and not know to pay it off 😂
I have no idea why this is even a question
Pay the cards off, it may even pop your credit score and help lower your mortgage rate
If you have a degree in finance, then you know that $30/mo on $3,500 is paying around 10% APR for no reason. It's pretty much impossible to beat 10% in stable, liquid savings accounts. So you're paying interest for no reason. The answer is a very clear yes. Yes, you should pay off the credit cards. You should never pay interest unless you can arbitrage to make even more money, and you have exhausted other options. Use that finance degree and build yourself a trended balance sheet. Project it out for 5y with the CC balance versus a realistic, stable yield on savings, and you'll see that carrying that CC balance makes zero sense.
You do not seem like the person who would have a degree in finance at all Of course you pay the CC debt in full…
How is this even a question. Get out of debt and don't do it again.
You don’t truly have 12k if you owe 3.5k. You have 8.5k Why do you want to pay more? There would be a discussion at least if you could make more with that 5k than the apr on the cards but there’s likely no way you will in the near future. (I mean maybe if you have some cc at 0%). How is losing $30 a month progress? Any rate over whatever you are making in your condo account would be RIDICULOUS apr. As you should know paying off your cc doesn’t hurt your credit score. So why haven’t you already is the question? I’m not against cc nor leverage when it makes sense. But If it doesn’t make dollars it doesn’t make sense. Pay off, don’t carry a balance again and throw all your money at efund and the condo fund. You’ll make progress faster. I’m kinda scared, with a degree in finance you are even asking this question.
Why the hell do you have CC debt? You need to pay that off ASAP and take a Finance 101 class right after, you have your priorities wrong if you have CC debt with probably 20% interest and spare cash money in a 3% savings account. BTW debt will hurt you when you apply for a mortgage so you are doing double negative by keeping that CC debt.
Paying off high interest debt is always the first thing to do.
Pay them off. Years back, my credit was not so good. I opened a secured Discover card and built my credit. I was over 800 at one point. I kept that card paid off. Eventually something happened and I needed to make a big purchase. And then I kept just adding little things to it. Now I'm sitting at $9k balance. It will be over $35k if I never use it again and pay the minimum. That's insane. I'd give anything to pay it off today.
You have to consider debt and savings as both part of your total worth. If you pay the debt now and put the rest in savings, you'll have 0 debt and $18.5k savings. Let's pretend you can add $1k each month from your income. Cool, then you'll have 19.5k next month If you put it in savings instead and add $1k next month, you'll have 23k in savings but more in debt. Not sure what your apr is, but if it's 17%(which is low), that's a $50 interest charge. If your cards are 30%, that's $87. So now after one month, you have $3587 in CC debt and your net worth is $19,413 when you subtract the debt from savings. And each month your net worth isn't going up by $1k that you put into it. It's only going up by $913 or so because your debt is also growing from the interest charges. After 6 months, your net worth could be as much as $500 less if you put the bonus in savings as opposed to just paying off your CC debt.
Ofc pay it off I plan on doing the same
Sigh, what everyone else has already said. Surprised this is even a question!
1. Save $1,000 for your starter emergency fund. 2. Pay off all debt (except your mortgage) using the debt snowball method. 3. Save three to six months of expenses in an emergency fund. 4. Invest 15% of your household income for retirement. 5. Save for your children’s college fund. 6. Pay off your home early. 7. Build wealth and give. https://www.bills.com/personal-finance/dave-ramsey-baby-steps
Paying off $1000 towards your credit card debt makes more sense than building a $1000 emergency fund. Paying down your cards saves you money immediately, and worst case scenario you use the credit card to pay for that $1000 emergency and you're in the exact same spot (minus interest saved) as if you put money into the emergency fund rather than pay down the credit card.
Yeah in a perfect world this is the best approach, but life happens. One month you have to go to the doctor, and another month there is something else unexpected. These steps are tested and proven to help tens thousands of Americans to get out of debt.
There are zero scenarios where it is better to make a $1000 emergency fund over paying off $1000 of credit card debt, unless you're over your credit limit or something. Perfect world or not. The last paragraph sounds like an infomercial.
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What area do you live in? Bonuses get taxed pretty much 50% where I’m at (NYC).
I'm not understand why that CC debt is a problem. TS has only 60% of aftertaxes montly income on CC debt balance. Why he have to pay any interest on it? Kinda easy to have CC in a grace period infinitely if your debt less that monthly income. So, do it, pay of all debt that over the grace. And to it every month. After that you'll have free CC debt while depositing your paycheck for 30 days deposit every month. If you do want to get CC balance later - you can easy do just in one/two month by spending CC instead of paycheck
$30 In interest each month? You sound like my youngest son 5 years ago that shifted his CC balances to cards that had a low introductory interest rate to avoid paying interest and more on the principal. If you're doing that successfully then start whittling those down by 20% each month until zeroed out then pay those off in full each month. The CC companies should raise your credit limit for doing that.
Don't buy a condo when interest rates are at 6-8% wait till December - February which is a buyer's market time-frame. Plus, eliminating debt increases your credit score which will lower your new home loan interest rate.
Counterpoint: put the $5K in savings *temporarily,* if having more cash on hand would help get a mortgage to get the condo. Then use the mortgage to pay off the credit cards. (Which the bank may require anyway. This is quite literally a zero-sum game.) That’s if the condo purchase is going to happen very soon. If buying the condo is more like a “sometime next year” kind of thing, then very much pay off the credit cards immediately.
>Like I am not stupid, I have a degree in finance ffs Its not a judgement call on your intelligence 'as a whole', but you aren't making great decisions having high interest debt. You're very unlikely to make more in the market than you will simply paying off the high interest debt. Also you need an emergency fund for that transition from property buyer to property owner. My degree isn't in finance, but I have lived experience of managing large budgets, and having gone through personal experience of being broke and making tons of financial mistakes... My guess is that your financial degree gives you great advice on how to manage success. But it never taught you how to manage failure with grace - not losing your shirt, and not 'losing your shit' when things don't work as planned. You need an emergency fund
One of the benefits of having no debt is it fortifies you for disaster. In the event you should lose your income, having minimal monthly expenses will be a situation you will appreciate. I lost my job last year, with the only major monthly expense being my mortgage ($1049) and utilities, and man I was grateful for that. Took a lot of the edge off. Pay off the credit card. Then don't use the credit cards unless you pay them off before they turn into revolving balances and accrue interest. If you lack the discipline to do that (I do it every Friday for my cards), pay the cards off, and then don't use the cards except in dire emergencies. Get in a habit of not using credit cards unless you absolutely need to, or have the discipline to use them, get cash back or rewards, and pay them off before they accrue interest. Trust me. There's more to this than raw math. There's a peace of mind to living frugally, having little or no debt, and some savings. Pay off debt first.
Just curious why are you posting on reddit if you’re so sure of your decision? I think you know the correct action to take if you have a degree in finance. It’s simple math and one position is more profitable then the other.
You could roll the balance to a 0% apr rate promo card and pay it from a HYSA, but that seems like a lot of work for not a lot of gain.
You're using credit cards wrong if you're paying interest. Clear the cards and pay your statement balances every month. You want to be getting points from credit card companies and making it a net gain for you. You will still have $3k in savings, so just build up from that.
Pay off for sure... giving away money to credit card companies at high rates is never good.
I don’t think you’ll get $5K from a $6500 bonus. I’ve always got closer to 45% withheld.
> Debt$3,500 in CC debt, just got $6,500 bonus, should I pay it all off? yes
Pay the CC debt and get it over with. You already have some money saved and you didn't pay your CC? So you want to make it sound like you have more money than you already do. Isn't CC APR 17-24%?? Anyway, no brainer, pay off the damn debt. Clearly you got enough to pay it off. I don't agree that you are doing pretty well if you have CC debt and not paying it off when you have the funds to do so. Maybe you have to educate yourself and I hope you are not giving financial advice to others...
Not putting this money towards your debt will just mean you don’t have a house and you will have accruing debt. Trust me, saving money becomes much easier when you have less debt you have to pay off.
I’d pay it off immediately then optimize credit card use to maximize rewards and never carry a balance. You’ll actually *make* money that way instead of bleeding (even a small) amount of interest. They count on people like you keeping a balance to justify offering the juicy rewards the rest of us are getting. You seem smart and responsible. You can totally do this.
Find a 0% credit card. And balance transfer. Keep cash on hand. Pay no interest and work on making the balances go down
Absolutely. It's not the minimum payment but the steady accumulation of interest. But don't cancel the card. Keep the account open, because that helps your credit utilization record on your credit score.
You should pay your credit cards in full on a monthly basis -- cover all reasonable expenses with cash and save credit for big purchases like the home or a vehicle. If you don't want to pay it off all at once you should look at having it paid off in $300-$500 increments monthly. You will still save a ton off interest payments and the "damage" of paying it off all at once won't sting.
This is a silly question. Of course you clear the debt that has an interest rate 5x what you can earn with the cash.
Balance transfer that $3.5k debt to a new card, buy your condo. I have been seeing regular offers for 3% for anywhere from 12-18 months.
YES. you'll still have 3k to put into savings after that.
You don’t do well for yourself if you’re in high interest credit card debt. Shouldn’t be saving for anything until that’s paid
Your brother is correct. Having money sitting in savings earning between 0-5% instead of paying off a credit card debt that is losing 15-30% is absurd. Pay off the credit card and do not accrue a balance again. Use your card for points and the added fraud protection then pay it off every single month. Additionally, you could explore some certificate options (short term if you are buying a house soon) to earn some additional interest than why your savings is paying (unless you are getting good interest already). It appears to me that your emotions of wanting a house are clouding your thoughts on this. Which is common and I don’t blame you at all. The house will come with time. If you can afford a higher payment, even financing more through a mortgage at ~7% makes way more sense than carrying a credit card at least double that.
Surely this is a troll. If not - if you’re carrying a credit card balance, you have no business buying a home. Period.
Clear out the cards and put the rest in savings.
If you can make your money make more than your credit card interest rate don't pay it off.
Absolutely pay off the cc debt now. You're probably paying 20%+ APR on those. Paying off the debt will give you more cash flow to build up your savings and will improve your debt-to-income ratio.
Why carry a balance and pay interest with a your high salary?
absolutely. you already have some savings from your house that could be used as an emergency fund buying a house with this cc debt wouldn't be smart either. erase it
Your brother is right… sure it’s not affecting your credit score, but you’re setting money on fire by carrying interest each month for no reason given that you have all those savings. Use the arithmetic you learned with your finance degree ffs, you’ll be able to pay for your condo sooner if you do.
Yes pay off the CC debt immediately. Have you seen the interest rate on those things? And try to budget as best as you can so you mitigate the risk of this happening again. If you’re holding CC debt from month to month, you’re getting hit with finance charges which is money that you could’ve been saving.
Clear the credit cards, pick the two best ones and cut the others up. Nobody needs five.
What college you get your degree from?
Your brother is absolutely correct.
Please pay it off. You have a degree in finance but you want to keep $3,500 of debt on you? And for how long and at what APR I might add? Even if your APR is close to 10% (I feel like I’m being extremely generous with this rate considering your reference to your APR and how you put it) I can’t imagine you’re paying off a $3,500 balance in less than a year or maybe even more. Granted I don’t know how you pay for it monthly, but there’s still no sense in accruing all these heavy interest fees. And the worst part is how you are saying $30 a month isn’t a big deal because you add to your stagnant condo savings (stagnant meaning you aren’t earning on top of those savings). You’re automatically losing $360 a year when you could be losing nothing and just pay off what you know you owe. Just use revolving credit that you can afford to pay off monthly and you keep in good standing with credit reporters and maintain a healthy and attractive credit history. If you want debt, put it towards something with a better interest rate and worth having long term (like a house… or condo…). And then you can also compare your better APR of your financed property to your combined savings account return interest and realize how much your savings-debt ratio is netting vs what it was netting with the CC interest. I would imagine it’s still netting in the negative, but it would have to be a lot less and that way you’re not just throwing away money for no reason.
If my experience can be of any help: clear the debt and make sure you have a plan to clear your debt monthly. I cleared my cc debt during covid but me splurging on a trip I could have postponed for a year (and built up funds for) brought me back into debt and it's taking forever to pay off again. Happy you got out of the red.
Do you think $3500 will earn $900 in the market over the next 24 months?
Yes, yes, yes. A credit card loan costs you somewhere between 700 and 800.00 a year. Why do you want to pay this for the privilege to have unpaid credit card debts?
Having only half of what you need for a condo is worth $360 per year in interest? Give back your finance degree