Use Savings to Pay CC Debt or Balance Transfer

John678 on 29/09/2019 - 18:56

I have about 15 k in “savings” - however I have debt

I currently have a $3300 balance at 0% 14 months into the 26 month interest free period. I plan to pay this off before the 26 month intro expires.

However I still have $5000 debt from 2 other cards. One is at 20% with a balance of 4K and the other is 1200$ at 12%.

I don’t know if i should use savings to pay the $5k now or transfer to a 0% credit card for 18 months. I understand every application is a hit on the credit rating.

Does it ever make sense to apply for a 0% balance transfer card if you have the savings, especially when you consider the poor savings rate currently?

At the same time, is using 1/3rd of my savings a good idea when I can get 18 months of interest free instead?

Financial Credit Card

Comments

  • spackbace on 29/09/2019 - 18:59
    +29

    https://www.ozbargain.com.au/node/367068

    Just clear the debt.

    Pay off the $8,500 debt and you'll still have $6,500 in savings. Even the 0% is just another form of debt hanging over you.

    Seems crazy to me that you'd have cash savings while paying interest on credit cards.

    • GoldenDragon888 on 29/09/2019 - 20:39
      +1

      This.

      I want to vote twice for this comment.

  • CyberMurning on 29/09/2019 - 19:48
    +3

    Paying 20% interest is just crazy

    • John678 on 29/09/2019 - 20:01

      Yes mate that’s why I’m making this move.

      • garetz on 29/09/2019 - 20:43
        +5

        I dont think you understand what they mean by paying 20% interest is just crazy, what he means is getting into a situation where you have to pay 20% interest on any kind of loan is absolutely crazy in the extreme.

        It's good you are taking steps now, but it would be even better if you prevented the situation in the first place.

        Anyway this is my advice

        Concentrate on the $5000 debt, put 0 dollars into the interest free loan. prioritise paying the $4k at 20% interest asap, put every dollar you can into that, pay it off yesterday if you can. Then prioritise the $1200 at 12% until that is paid off, then use the remainder of your payments after these 2 are paid off to pay the interest free loan within the interest free period.

        Then once all your debt is paid off use your credit card as a resource, you should never be purchasing anything on a credit card you cannot pay off before the 55 days interest free period ends, allowing you to have a small loan, which you pay off monthly meaning it allows you to fix liquidity issues, while making sure you pay 0 interest.

  • GoldenDragon888 on 29/09/2019 - 20:27
    +9

    So you have $15K in savings?

    Every day you delay paying your debts off you are being charged $3.56.

    Your $15K in the bank, if you have it in the top HISA is earning you $1.02 per day. It’s less.You are losing money.

    I think you should pay of your debts with your savings and cut up the cards.

  • BlueGlass on 29/09/2019 - 21:15

    Clear the debt, its a no brainer.

    You should never aim to ever pay interest on a credit card ever.

    You have 'savings' because you haven't paid your regular bills I suspect. Retaining $10K in savings is healthy buffer for life's challenges, there would be few scenarios where you could better spend the $5K.

  • John Kimble on 29/09/2019 - 21:45
    +1

    FYI $4,000 + $1,200 = $5,200.

  • [Deactivated] on 30/09/2019 - 10:40
    +1

    Which begs the question, where did the $15k come from? Inheritance? The bank of Mom & Dad?

    Apologies if I'm jumping to conclusions here but you don't sound money-savvy enough to have saved those 15k on your own.

    • John678 on 01/10/2019 - 09:24

      I got my first full time job 2 years ago. I wanted to get to 10k as I’ve always struggled to save and felt once I hit this barrier it would be a huge psychological boost for me.

      • [Deactivated] on 01/10/2019 - 14:10
        +2

        The best way to save is to spend less ; not spending the same and putting it on credit cards.

        I would pay off the debts and get rid of at least 2 of those credit cards.

      • spackbace on 01/10/2019 - 17:32
        +1

        It's not really 'savings' while you still have debt. Kinda concerning that you focused on that magic $10k figure, while making payments on credit cards (hopefully not growing debt on those too).

        As I said before, pay off all the cards (including 0%) and cancel and cut them. Then you'll really see your true savings figure.

        • [Deactivated] on 02/10/2019 - 14:46
          +1

          I would keep one for emergencies but would give it to someone I trust to hold on to, so that you're not tempted to use it to buy the latest iPhone or something.

  • stoodamire on 30/09/2019 - 12:08

    You should hand in your OzBargain membership.

    Never pay interest on CCs. That's rookie stuff.

  • damolol on 02/10/2019 - 19:19

    Holy hell surely this can’t be real right?
    If this is then of course you should pay off those debts first!! Credit card debt where you are paying 20% interest is not normal!! (Barring some unexpected circumstances)

  • John678 on 04/10/2019 - 13:28

    A lot of people got off topic. The actual question was do I use my savings or pay it over 15 months on a balance transfer.

    • spackbace on 05/10/2019 - 12:21
      +2

      Just clear all the debts. You're obviously not great with finances if you saved money while paying off debts. Having access to a credit card just sounds like a dumb idea and will affect future borrowing power.

      Pay everything off now, cancel and cut all the cards and have $6k in savings.

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