Psychological benefits of using savings to clear debt

EimearF

Can anyone give me an insight into whether they felt it was worth emptying their savings and becoming debt free?

I have £4643 interest free on credit card and £4700 in savings. I know the smart thing to do is keep the savings but the fact i still have debt is stressing me out as I am in the final stages of paying off over £40K.

Id be interested to hear how other approached this situation and whether its worth taking £3700 from savings so that i still have emergency fund and paying the card off as soon as possible.

Thanks for reading.

Willing2Learn

I would definitely keep your Emergency Fund.

As far as your savings go. If your savings earns less interest than you are paying toward your debts, then I would use some of the savings to repay the card debt. Is the card debt frozen (not charging interest)?

Like I said, I would still retain the EF though.

And well done on debt-busting £38,000 so quickly.

EimearF

My card is an interest free balance transfer, ive luckily caught and acted on my problem before it came to defaults.

No matter what i will be keeping £1k as an emergency fund.

I know the savings will earn a little interest but Im not sure if that money is worth the stress of continuing to carry debt - even if its interest free.

but having no savings carries its own stress!!

PasturesNew

Pay off the debt. If you get an emergency, use the now empty card.

Silver_Queen

Keep £1k emergency fund and use the rest to partially pay off the debt. Then pay off the remaining £1k debt ASAP.

[Deleted User]

I did exactly this last autumn and it was a huge relief to know that I'd wiped £7k off my total debt figure in one click.

I guess it depends on your values: how much you value your own mental wellbeing, compared to the value of interest on the £4.7k savings pot. For me, my day-to-day mental far outweighed the fact that I might have made an extra £150 or so over a year on my savings. Martin has a good post on this on the main site ('Repay debts or save?')

middleclassbutpoor

I agree- keep £1k and repay the rest off.

Focus on clearing the £1k and building a bigger emergency fund.

Moneyminded

When is the 0% interest period up? Can you afford to keep your savings in tact and clear the balance before the 0% rate ends? If so I would do this. If not, I would pay the minimum each month (and not spend any more) and then when the 0% is about to come to an end clear the lot from savings.

Whilst you are not paying any interest on the credit card it makes sense to have the savings earning something.

It's your choice though

EimearF

I can clear the card in 3 months, but equally that means I could be debt free come pay day and rebuild my savings within 3 months.

I feeling stressed cause I haven’t really touched the debt in months while I’ve been saving .

JGB1955

Pay the debt off...then tomorrow is the first day of the rest of your life.

gettingtheresometime

If the debt is interest free and you're earning interest it would be costing you, however little to pay off the debt.

Personally I would keep the savings and just work towards clearing the debt