Is this a good way to pay off our cards?

Sue_J.

My husband and I have about $8,000.00 in credit card debt.The interest rates range from 18% to 22%. We have about $45,000 in a mutual fund for our retirement. The credit card payments are getting tight because I am laid off.We havent been late yet and are considering taking $8,000 from the mutual fund,paying the cards off and cutting them up.

I know we'll get slammed at tax time but our refund would cover the taxes on the withdrawal.Is this a good thing to do?

Thanks.

BTW we are in our mid 30's.

CLAPTON

it makes excellent sense to pay of debt at 18% to 20% from savings.

you can after all rebuild your saving with the money you were using to pay off the CCs each month.

i dont understand why there is any tax implications however.

Donedoingdebt

Is there any chance that your cards could be covered by payment protection insurance to cover the period that you're laid off?

Sue_J.

I didn't realize this was a UK based site when I asked. I'm in the USA.You get hit with a 50% tax penalty when you withdraw from your mutual funds early.

Sue_J.

Donedoingdebt wrote:

Is there any chance that your cards could be covered by payment protection insurance to cover the period that you're laid off?

Im the secondary (authorized user) on the accounts.They are in my husbands name. So it wouldn't help to cover me.

lynzpower

Or you could move your card debt to 0% cards if you have a good credit rating, and save your savings and see the debt reduce. If you have a good CR then no need for 18% APR cards, theres loads of low Life of balances and 0% ers out there - take them!! If your not able to pay in the long run, fair enough, but I wouldnt risk your savings just yet.

Have you done a SOA before? If you havent they are a go way of finding other cutbacks to save money to get debt free quicker x

lynzpower

Oh, if you are based in the US, doubt our recommendations for 0% cards etc would work actually....

Sue_J.

I cant get a credit line high enough at 0% to do any transfers.Sigh.

BobProperty

As most of us here know very little about finance and credit rules in the US, and I suspect they vary from state to state anyway, I can only suggest that you try and find a similar forum in your state. Hopefully, you will find someone who knows the local laws and may be able to help. The only other suggestion I have is look up the work of your fellow American John Cummuta, who has written a series of books / audio programmes on getting out of debt. Just try not to pay too much for the book or audio course