Current Events > i have 5000 dollars in credit card debt, but 4000 in savings

(+) Yeah! (+)

any point in keeping the 4k? should i just bring down the 5k debt to 1k?
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half n half
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Would probably be a good idea.
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If the 4k is just going to sit, not really any point in keeping it around earning less than the interest you're paying. But if you get rid of all your liquid assets, you'll make paying for other expenses more difficult, so keep that in mind.
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Whats the rule of thumb, keep like 3 months worth of paychecks in your savings?
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The real question is, do you need to keep spending using credit?
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the_rowan posted...

If the 4k is just going to sit, not really any point in keeping it around earning less than they interest you're paying. But if you get rid of all your liquid assets, you'll make paying for other expenses more difficult, so keep that in mind.

The way I've always seen it is worst case, if an expense DID come up before he could save a bit, he could put it back on a credit card and not really be in a worse position.
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i have about that much in CC debt

but only about $1k in savings
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I'm in the same boat but I paid off until I had 2k debt and 1k cash.

Then I got two credit cards with 0% APR for 18 months and put the remaining 2k on them

Now I have no interest accumulating and have liquid cash while I pay off the cards
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AngelsNAirwav3s posted...

Whats the rule of thumb, keep like 3 months worth of paychecks in your savings?

Lol. I might hit that in a couple years
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GregShmedley posted...

Maybe cut back like 75% of what you contribute to savings and direct towards the debt? I wouldn't wipe away your savings like that.

Debt is managable; once savings are gone, they're...gone until you save up more, of course.

Simply "having savings" isn't worth anything if it's only there because you have a debt that's costing you more over time than the savings earn. The reason you'd keep some around is because that money can be used for anything without worrying about if the merchant will take your credit, not because it's inherently good to have savings when it's just losing you more money over time. There is basically no investment that can be expected to earn you more than you pay on credit card interest, which is generally obscenely high.
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You should have some kind of emergency fund for if your car breaks down or you get laid off. Usually 6 months of expenses is recommended.

That being said, it's also wise to get rid of credit card debt ASAP, as it has some of the highest interest rates of any kind of debt.

Don't use all your savings, but I wouldn't add any more to savings until you have the debt paid off. If you still live with your parents, then you can probably afford to take ~2k from savings to pay down the debt.
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It totally depends on how stable your income/assets are.

If you know that you are going to have money for the next few months, you actually save money by paying off as much as you can ASAP.

If you're not sure if you will need emergency savings, it's better to keep the money.
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GregShmedley posted...

Maybe cut back like 75% of what you contribute to savings and direct towards the debt? I wouldn't wipe away your savings like that.

Debt is managable; once savings are gone, they're...gone until you save up more, of course.

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Simon_Petrikov posted...

AngelsNAirwav3s posted...

Whats the rule of thumb, keep like 3 months worth of paychecks in your savings?

Lol. I might hit that in a couple years

Stop living outside your means, lower your monthly budget.
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keep 1k and spend the other 3k on paying down the credit cards

then every dollar you make goes towards paying off the rest of the credit cards

the 1k will be your emergency fund

put it all down on credit card. Credit card dept is worst possible dept. You already use your credit card for everything, no need to keep any of that cash laying around.