Pay off debt or keep cash reserve?

davetza

I was out of work for three months during which I used a combination of credit cards and savings to pay my bills. I now have work again (yeh!) and I was wondering should I keep what is left of my savings to pay off my debt as they basically are the same or should I keep the savings and use my current income to pay of the credit card debt?

Neither the debt or savings is particularly large (both under £5,000) and I would expect I would be able to pay the credit cards off in the next 6 months if I did not use my savings. My main outgoing is my mortgage and I would prefer to keep my savings as a buffer in case anything else happens. My wife however is keen to be debt free so I though I'd ask here to get as much info as I can before making a decision.

Thanks
David

lorac3

Hello I am no expert but I would pay £3000 off the highest interest cards try to put the rest on a 0% and have £2000 as a 'buffer' ( emergency fund ) then get the rest paid off asap. This is what I would do but someome more knowledgable will probably come along soon. Good luck.

LittleEmms

Hi Dave

Newbie here – so I just wanted to say hi & welcome – the more experience people will be along soon to help you more.

This is something I’ve battled with – and think the link to Martins page may help. http://www.moneysavingexpert.com/cards/pay-off-debts

(apologies if you have already read it:rolleyes: )

My (basic ) understanding is you are paying more in interest with debt than you will be adding to your savings (especially with interest rates as low as they are now).

My feedback from the forum – I’ve been asking the same question as you – is to keep an emergency savings fund (i.e. for cars/ house problems – boiler, etc). Then use the remaining savings to clear the debt. Once all debt is gone – start with savings again.

Only my opinion – and PLEASE wait for the more experience, far more knowledgeable, ‘yoda-wise’ people to come along!!!

Take care!!!!

Emms

angelflower_2

personally I would pay off debts and try to use the money you would pay to the cards to build up savings reserve again. No point having to pay to have debts if you dont have too - also, your money is currently not making much interest.

Just my opinion though