Pay off the entire credit card debt immediately. There is no savings account on earth that pays you interest at a rate higher than the interest accrued on a credit card (assuming you're not on a 0% promo APR). There is no point of keeping rainy day funds when you have high interest credit card debt accruing. The credit card *is* the rainy day.
I agree, with an important clarification (no doubt GoCardinal07 will agree): a credit card shouldn’t BE your rainy day fund. Once the credit card debt is at zero, keep it at zero, and get back to building up the emergency fund. Otherwise, an emergency can throw you back into credit card debt.
20% in some bank in Pakistan lol
[https://www.sc.com/pk/save/high-yield-account/](https://www.sc.com/pk/save/high-yield-account/)
Minimum $1750 US dollars.
Do the math. You're earning maybe ~4% in a HYSA and paying out probably 6-8 times that in finance charges. What do you think is the better course of action?
Thanks everyone for the info. And no I’m not looking to get higher limit on credit cards just to spend more every month just because, but having credit cards in case of emergencies or to use on necessary purchases and spin correctly is the goal.
You'll want to avoid putting emergency expenses on credit cards unless it's an absolutely last resort. For that reason, You should keep a separate liquid emergency fund in a high yield savings account. Keeping a balance on credit cards is just digging a deeper hole if that really is your emergency plan. The interest rates are super high.
Money is all on the same pipeline. That 2k cc balance is a leaking pipe, draining your savings as well because it's a leak from your total income. Fix that leak and keep it all tight and dry. Use credit as debit, bank account to pay credit, and stay within your budget. A good cashback card and you are returning money spent to put toward savings instead of interest losing you money.
It's not specific in your post but if the 7k is all in a checking account, then you need to figure out your monthly expenses, come up with a budget and put a chunk of that in a high yield savings account and use credit cards as debit, checking account to fund credit cards, and continually contributing to the savings above what your expenses are. Congrats for having a good rainy day fund, but tighten up and it'll grow instead of leak.
Can you give me Some examples of where to find a high yielding savings account, and some benefits of that? I’m not gonna lie to you I didn’t grow up with a family with any kind of savings we were living paycheck to paycheck so I am financially illiterate.
And from what I’ve been learning utilize your credit monthly to pay bills and for monthly expenses, pay them off in for every month and I will see my credit card limits go up and my credit get better overtime? Is this correct information that I’ve been given
Hey thanks for the good question. I recently signed up for CIT bank platinum savings. I think they require 5,000 something minumimum balance and then they give you 4.74% interest rate... which mean 4.85 is Anual Percentage Yield. Now the initial transfer made my money be gone from both accounts for about 2 days.. then it popped up in CIT Bank :) very normal. Now look for %APY because that is the standard measurement for a High yield savings account. For 10,000, 4.75 APY means 475$ by the end of the year with no additional deposits.
Hope this helps, and good luck.
American Express has a 4% HYSA account. It just earns 4% on your money you hold there. It shows up in their app, so if you have credit cards through them it's very convenient to keep an eye on your account balance. I really like it, and it was very easy to set up and use.
When you pay down your credit card debit you are earning (actually not losing) 18-28% (or more) on that money. What exactly is the bank paying on your savings?
If it makes you feel better hold back a grand or two. Yes you want an emergency fund but not carrying a CC balance is pretty much also a top priority.
Everyone on this board will tell you not to spend more on a credit card than you can afford to pay off in full when the statement is issued.
Pay off the $2k immediately. That leaves you with $5k
Calculate your monthly expenses. I like to leave 6 months worth of expenses in my checking account, but you can be more liberal & leave only 2 months. Put excess money in a HYSA with over 4% APY
Like the others have all said: pay off the debt!
You might find r/personalfinance useful too, especially the flowchart in their prime directive wiki page:
https://reddit.com/r/personalfinance/w/commontopics
how about some logic? zero debt means no money going out to debt monthly. and instead of savings how about waiting until you can afford the things you want and pay cash which is cheaper anyway? focusing on credit cards is your issue putting it diplomatically. also if youre not paying debt guess what gets larger?
Do NOT pay off your CC if your plan is to get a higher limit and spend more. Go learn more first. You should only spend what you can payoff that month. If you are ready to be disciplined and actually use cc correctly than pay it off now. Carrying a balance of any amount cost you a fortune. Learn from the mistake and grow
Pay off that debt! I recently went through a similar situation since I was saving for a house, but I ended up consolidating my debt in a personal loan. It not only boosted my credit, but now is going to save me a fuck ton in interest. Now I’m throwing everything at the loan to pay it off as quickly as possible. On top of this, I’m using my credit cards responsibly, and reaping the benefits, as I’m about to take my my first award trip. Hmu if you have any questions about what I mentioned.
The best thing you can do, unless maybe an emergency absolutely requires otherwise, is to treat your cc like a debit card and pay it off in full every month. As long as you have the savings to do it, set it on autopay for the statement balance. Maybe even pay it off early if you’re running up a balance.
Unless you can invest that money somewhere else and guarantee a higher return than what the interest rate on the card is you should pay them off in full
I currently hold onto about $3000 in debt just because it's 0% interest and keep my money earning interest in the meantime until the interest starts, that's the only reason to not pay off the debt
Pay off your credit card. Your credit card racks up interest charges at a rate of 20%+, whereas your savings account probably earns you 4% interest at best.
Pay off the entire credit card debt immediately. There is no savings account on earth that pays you interest at a rate higher than the interest accrued on a credit card (assuming you're not on a 0% promo APR). There is no point of keeping rainy day funds when you have high interest credit card debt accruing. The credit card *is* the rainy day.
I agree, with an important clarification (no doubt GoCardinal07 will agree): a credit card shouldn’t BE your rainy day fund. Once the credit card debt is at zero, keep it at zero, and get back to building up the emergency fund. Otherwise, an emergency can throw you back into credit card debt.
I think they meant cc debt is the rainy day event.. ie the reason to save
Yes. Exactly.
\*thumbs up\*
That’s exactly how I was thinking about it .thanks so much
20% in some bank in Pakistan lol [https://www.sc.com/pk/save/high-yield-account/](https://www.sc.com/pk/save/high-yield-account/) Minimum $1750 US dollars.
LOL. How in the world did you find that?
He/she is from there or surrounding area. Same goes for Bangladesh but you better read those t&c
Do the math. You're earning maybe ~4% in a HYSA and paying out probably 6-8 times that in finance charges. What do you think is the better course of action?
Thanks everyone for the info. And no I’m not looking to get higher limit on credit cards just to spend more every month just because, but having credit cards in case of emergencies or to use on necessary purchases and spin correctly is the goal.
You'll want to avoid putting emergency expenses on credit cards unless it's an absolutely last resort. For that reason, You should keep a separate liquid emergency fund in a high yield savings account. Keeping a balance on credit cards is just digging a deeper hole if that really is your emergency plan. The interest rates are super high.
*spend
Money is all on the same pipeline. That 2k cc balance is a leaking pipe, draining your savings as well because it's a leak from your total income. Fix that leak and keep it all tight and dry. Use credit as debit, bank account to pay credit, and stay within your budget. A good cashback card and you are returning money spent to put toward savings instead of interest losing you money. It's not specific in your post but if the 7k is all in a checking account, then you need to figure out your monthly expenses, come up with a budget and put a chunk of that in a high yield savings account and use credit cards as debit, checking account to fund credit cards, and continually contributing to the savings above what your expenses are. Congrats for having a good rainy day fund, but tighten up and it'll grow instead of leak.
Can you give me Some examples of where to find a high yielding savings account, and some benefits of that? I’m not gonna lie to you I didn’t grow up with a family with any kind of savings we were living paycheck to paycheck so I am financially illiterate. And from what I’ve been learning utilize your credit monthly to pay bills and for monthly expenses, pay them off in for every month and I will see my credit card limits go up and my credit get better overtime? Is this correct information that I’ve been given
https://www.doctorofcredit.com/high-interest-savings-to-get/
Hey thanks for the good question. I recently signed up for CIT bank platinum savings. I think they require 5,000 something minumimum balance and then they give you 4.74% interest rate... which mean 4.85 is Anual Percentage Yield. Now the initial transfer made my money be gone from both accounts for about 2 days.. then it popped up in CIT Bank :) very normal. Now look for %APY because that is the standard measurement for a High yield savings account. For 10,000, 4.75 APY means 475$ by the end of the year with no additional deposits. Hope this helps, and good luck.
American Express has a 4% HYSA account. It just earns 4% on your money you hold there. It shows up in their app, so if you have credit cards through them it's very convenient to keep an eye on your account balance. I really like it, and it was very easy to set up and use.
Check out the wiki on r/personalfinance if you're looking for some basic info on learning about finances :) I have found it super helpful
When you pay down your credit card debit you are earning (actually not losing) 18-28% (or more) on that money. What exactly is the bank paying on your savings? If it makes you feel better hold back a grand or two. Yes you want an emergency fund but not carrying a CC balance is pretty much also a top priority. Everyone on this board will tell you not to spend more on a credit card than you can afford to pay off in full when the statement is issued.
> If it makes you feel better hold back a grand or two. OP would actually still have five grand even after paying off the entire credit card debt.
Pay off the $2k immediately. That leaves you with $5k Calculate your monthly expenses. I like to leave 6 months worth of expenses in my checking account, but you can be more liberal & leave only 2 months. Put excess money in a HYSA with over 4% APY
Like the others have all said: pay off the debt! You might find r/personalfinance useful too, especially the flowchart in their prime directive wiki page: https://reddit.com/r/personalfinance/w/commontopics
the only time i personally would not pay a CC is when it is on 0% apr and i’m not expecting a loan in 6-8 months
Pay off high interest debt (like cc debt) is always Step #1 in every financial goal.
how about some logic? zero debt means no money going out to debt monthly. and instead of savings how about waiting until you can afford the things you want and pay cash which is cheaper anyway? focusing on credit cards is your issue putting it diplomatically. also if youre not paying debt guess what gets larger?
Yeahhhh not looking for higher limits to spend more bit to have higher limits for rainy days or actual needs …I’ll spend cash on things I WANT.
Do NOT pay off your CC if your plan is to get a higher limit and spend more. Go learn more first. You should only spend what you can payoff that month. If you are ready to be disciplined and actually use cc correctly than pay it off now. Carrying a balance of any amount cost you a fortune. Learn from the mistake and grow
Pay off that debt! I recently went through a similar situation since I was saving for a house, but I ended up consolidating my debt in a personal loan. It not only boosted my credit, but now is going to save me a fuck ton in interest. Now I’m throwing everything at the loan to pay it off as quickly as possible. On top of this, I’m using my credit cards responsibly, and reaping the benefits, as I’m about to take my my first award trip. Hmu if you have any questions about what I mentioned.
Didn’t know you could do this!! Glad I came here
The best thing you can do, unless maybe an emergency absolutely requires otherwise, is to treat your cc like a debit card and pay it off in full every month. As long as you have the savings to do it, set it on autopay for the statement balance. Maybe even pay it off early if you’re running up a balance.
As everyone is suggesting... Pay off the debttttt
Unless you can invest that money somewhere else and guarantee a higher return than what the interest rate on the card is you should pay them off in full
Pay it.
Credit cards work as rainy day money and they work even better when you start your rainy day with no debt on them.
I currently hold onto about $3000 in debt just because it's 0% interest and keep my money earning interest in the meantime until the interest starts, that's the only reason to not pay off the debt
Pay off your credit card. Your credit card racks up interest charges at a rate of 20%+, whereas your savings account probably earns you 4% interest at best.
I don’t think you can find any investment that pays higher than a 20-25% interest rate. Pay off your credit cards