CC balance vs savings

Rachel85

I am new to this site and wondering if anyone can help me with a little advice!

My partner earns around 28k per year and has around 2.5k on credit cards. He has a mortgage of 60k and a car loan which the company pays.

His credit card balance obviously isn't a major problem as he can pay it fairly easily over a few months. However he will soon be receiving a bonus of roughly the same amount as that on the CC and I have suggested he uses it to pay off his CC in full, cancel all but 1 for emergencies and then put the 200 pounds a month or so that he used to use for paying off the CC into a savings account.

He seems reluctant to do this as he likes having savings and doesn't see CC as a problem, but surely it makes financial sense? Also, we are hoping to move house in the next few months and I thought that having a clean slate, with no debt other than mortgage, would stand us in a good position.

Am I right in suggesting this? And any tips on persuading someone that this is the right thing to do?!?!

Tondella

Hi, the generic advice is that you lose more paying interest on credit cards than you earn on savings. If it were me (and it soon will be, when i get some back pay) I would put the amount on the credit card, not into savings.

The only caveat to this is if he has a 0% credit card, in which case you are better off earning interest on the savings until the 0% period of the card is over. Then you use some of the cash to pay off the card debt.

HTH

Rachel85

Thanks, that is precicely that I thought! I think he pays around 7% on CC, so pretty good, but more than the 5% in savings he could get.

Thanks (I have thanked u!)