Pay off debt or keep investments?

derekpayne

Hi

We have some money invested which is making good returns, we also have some debt which is not costing us any interest (0% interest cards). My wife & I keep having a debate as to whether we sould pay off our debts with our investments or not, I say not, she says yes. as prevoiusly stated we are not being charged any interest ("Credit Card Tarts") but just the minimum payments per month, (we will do another 0% offer when the 24 month term ends), my argument is that as we are not paying any interest it is best to leave our investments where they are, making more money, she thinks it would be better to get rid of our debts while we can, so we would have less outgoings every month, (about £100 a month). I would be interested to know what other people think?

eskbanker

If you're able to keep rolling 0% deals over and aren't particularly concerned about any impact on your credit files, then getting a decent return on investments makes financial sense if they continue to perform, but those are all assumptions that may or may not be true!  0% deals are harder to come by in the current climate for one thing, but if you're in a position to repay on expiry then that would be less of an issue - stoozers would normally have access to savings rather than relying on investments though....

Albermarle

It depends to some extent on the relative size of the debt vs the investment.

Thrugelmir

 One day your luck may run out. No one ever went broke by taking a profit. Investments have a nasty habit of all of a sudden disappointing. Far from a guaranteed return when investing in equities. 

derekpayne

Without giving anything away, the debt is about 6% of the investments.

Grenage

I suppose it would depend on how much your other half cares; if it's a big issue then what's 6% off the investments?

I'd probably not if I thought that CC debt would get racked up again once it was clear.

Another_Saver

derekpayne said:

Hi

We have some money invested which is making good returns, we also have some debt which is not costing us any interest (0% interest cards). My wife & I keep having a debate as to whether we sould pay off our debts with our investments or not, I say not, she says yes. as prevoiusly stated we are not being charged any interest ("Credit Card Tarts") but just the minimum payments per month, (we will do another 0% offer when the 24 month term ends), my argument is that as we are not paying any interest it is best to leave our investments where they are, making more money, she thinks it would be better to get rid of our debts while we can, so we would have less outgoings every month, (about £100 a month). I would be interested to know what other people think?

I do the same thing. The way I see it is to be safe you should have at least as much cash savings as this kind of debt, so that you could repay it if needed. On top of that, have some normal cash savings, and then anything spare can be invested. I couldn't comment on whether that situation applies to you, and I don't know what your investments are (i.e. a diverse and balanced portfolio, or... 100% Tesla stock).
Financially you're probably better off carrying on as long as you can keep getting 0%.
Paying it off would not lower your outgoings, they will be the same just condensed into one big payment. That is a misunderstanding.
This isn't really a financial question, more of an education/fear of debt issue.

steampowered

Depends on whether you can afford to pay off your credit cards out of your regular income, before the 0% interest rate expires.

If you can, it makes perfect sense to remain invested. It makes perfect sense to generate a return if you can borrow at 0%.

If you can't, it makes sense to pay it off. You don't want to put yourself in a position where you are forced to sell your stocks just after a market stock in order to avoid paying interest.

Thrugelmir

Presumably the 0% interest offers aren't free though. As will come front loaded with a transfer charge fee. That's paid everytime the balance is moved. 

Alexland

Thrugelmir said:

Presumably the 0% interest offers aren't free though. As will come front loaded with a transfer charge fee. That's paid everytime the balance is moved. 

Depends on the deal. Santander just sent me a card with 0% transfer fee, 0% interest and a £20 amazon voucher via an MSE affiliate link. I ensure that any stoozed money is matched against cash savings incase they call the money in early although it's getting harder to find good cash rates at the moment.

Thrugelmir

Alexland said:

Thrugelmir said:

Presumably the 0% interest offers aren't free though. As will come front loaded with a transfer charge fee. That's paid everytime the balance is moved. 

Depends on the deal. Santander just sent me a card with 0% transfer fee, 0% interest and a £20 amazon voucher via an MSE affiliate link. I ensure that any stoozed money is matched against cash savings incase they call the money in early although it's getting harder to find good cash rates at the moment.

Against stoozed cash there's no downside. As is a positive return. Complancey tends to creep in as far as investments are concerned. The music will one day stop. One only has to read some posts to glean how superficial the understanding actually is.