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Advice on paying off credit cards as opposed to saving

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Mark Cappel
UpdatedDec 1, 2022
Should I save or try to pay off my credit cards?

Should I save or try to pay off my credit cards? credit card debt 7,000.00. My savings 3,500.00

The answer really depends on the interest rates you are currently charged on your credit cards.

You should evaluate the relative rates on your credit cards vs. what you earn on your savings account. If you earn (after tax) a higher rate on your savings than you pay in interest (& ALL fees on your cards), then keep the interest. That is a very unlikely scenario, though, unless you are in a teaser or 0% interest period on your credit cards.

If your cards' interest rates are really high, then I would recommend that you pay of the high interest credit card debt, but that does not mean that you spend all of your savings.

It is always good to have a rainy day fund for emergencies; otherwise, you will end up using credit cards again during the time of your need. Once you do pay off the credit cards, make sure to cut off the cards that you don't need and keep only one card for emergencies. Get out of the habit of using credit cards and start using either cash or bank debit cards for your spending.

I also think that one should always follow a budget. If you want to learn how to budget your household finances, steer clear of debt, and do not get caught up in the debt epidemic currently affecting the U.S. You need the complete Bills.com Free Personal Household Budget and Finance Educational Guide

I hope the information helps you Find. Learn. Save.

Best,

Bill

www.bills.com

Debt statistics

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Housing debt totaled $11.71 trillion and non-housing debt was $4.45 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in Minnesota, 18% have student loan debt. Of those holding student loan debt, 5% are in default. Auto/retail loan delinquency rate is 2%.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.

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