Pay off debt with savings?

redrabbit29

Instinctively I know people will say "yes of course"... however:

I have £3k on a credit card which has been accumulated VERY quickly over the space of about 3-4 months due to several purchases which were required.

I have £3k in savings. The credit card is interest free.

It took me a long time to save that £3k, so I don't want to spend it! However, I think it's clear I should spend it, and clear the debt to start from a clean slate.

The plus is it's back to debt free. I won't have any savings, but I think it's the sensible thing to do.

Like I said, I think I know what to do, just wanted to "say it" outloud, and see if you agree?

Thrugelmir

Ensure you have sufficient savings to repay the card in full once the interest free period expires. No need to repay immediately. Unless you don't trust yourself.

-taff

Pay it regularly till the 0% runs out, then either transfer it to another 0% or pay it off.

greenorange

I'd keep £1000 in a savings account, use £2000 to pay off the card, and continue to pay off the remaining £1000 as quickly as possible.

Yes, it's interest free, however it's great to be debt-free. Likewise, you don't want to pay the full £3k, have no savings and an emergency pops up.

Zoology_Dragon

Hold on to your savings and pay it off just before the 0% ends. This is why we have both debt and savings, our debt is a £1k interest free overdraft and the rest is on a 0% credit card. We will be paying off the credit card just before the 0% expires and will pay off the overdraft after that just so it's gone. Currently that £4.5k is offsetting our mortgage so we'd be mad to pay it off while it's at 0%.

savingmummy

I`d be inclined to keep the savings, and be good with spending and throw everything you have to clear the credit card.


My reason is if you use ALL your savings to clear the cc, you`ll then use the cc and owe again, but will have no savings to fall back on.


If your keen to clear it quickly use `some` savings leaving some of your hard earned savings safe.

northerntwo1

You don't have savings. You owe £3000 which is being held in an account that pays better interest.

Much better way to look at it, remove that money from your mind as savings and start saving by reducing the amount owed.

Eyes_wide_open

I think it depends how you feel about the debt. Are you comfortable with it and happy to pay it off within the 0% interest period? Or does it sit uncomfortably with you and its weighing on your shoulders.

The savings will amass some interest but in the current climate its not going to be a significant amount that would change your life.

I would therefore suggest that you do what ever feels right for you.

A

bayzat

Credit cards are the most expensive form of debt, so either pay it off right before the interest kicks in, or if you can't afford to (or need to have the cash on hand), look at doing a balance transfer, or taking a personal loan to pay it off. Obviously the first option is best, but it is understandable if you want to have cash on hand in case of an emergency.

Monkeyballs

Your savings are presumably accruing interest while your credit card isn't...

Pay minimum off your credit card each month by DD (preferably not out of your savings) and a couple of months before your 0% interest period runs out pay the balance.

Even if your £3k in savings only accrues £20 interest then it's £20 in your pocket

MB

bambos

Hmm catch 22 really!

I will give you an example to highlight my point.....

You use your savings to pay off the CC and suddenly you need 3k for a blown up boiler/ car repairs etc, you would have no savings to fall back on & would therefore be in debt again.

I would personally look at the duration of the 0% divide the 3k over this period and pay the amount each month. You will pay it off, keep your savings and pay nothing extra.