Should You Use Your Emergency Fund to Pay Off Credit Card Debt?
April 4, 2007
If you had $10,000 of credit card debt and $10,000 in an emergency fund would you use the emergency fund money to pay down your debt?
My wife’s co-worker likes to spend money. She and her husband have accumulated a $10,000 credit card bill that they just can’t seem to pay off. The wife would like to use the money they have saved up towards the credit card debt but her husband is emphatic that they have an emergency fund to fall back on.
When the co-worker asked my wife for her advice she suggested using some or all of the savings to pay for the debt. She pointed out that a lot of the money they paid towards the credit card bill every month went towards interest. If they paid off the 10 thousand in debt they could put the same money they had been paying in credit card interest towards saving for an emergency fund.
The co-worker agreed that this seemed like financially sound advice; however her husband was set on having an emergency fund at all times. Having an emergency fund is a wise move but does it make sense to maintain this fund while paying high interest charges on the same amount of money to the credit card company? What would you do?
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