Comments on: Should You Use Your Emergency Fund to Pay Off Credit Card Debt?

By: tony

tony — Sun, 05 Dec 2010 00:33:26 +0000

the question is will they be discipline enough to not use their credit card again after they pay it off by using their savings? The other issue is, with the recession we are in, the paranoid banks are reducing people’s line of credit as they pay down balances! So we cannot depend on our credit cards for emergency. Personally, I do not trust banks. They are irresponsible with money that is why they have to beg for money from the government with the bailouts. And now they are holding on tightly to their cash.
In this uncertain economic environment, if your income is not steady, hold on to your cash! Make the most payments on your credit cards and ride through this Great Recession. I wouldn’t use all my savings to pay off my credit card debt, but don’t pile more credit debt either.

By: Brandy

Brandy — Tue, 24 Aug 2010 01:08:02 +0000

I have a similar question….I have accumulated debt about 12800. I have closed all my cards and have had them reduce the interest rate and put me on a repayment plan. However they are about to go up and I can’t really get another credit card to do a balance transfer. My husband has a money market that has 15000. Should we use it to pay off my debt in order to make things easier and to be able to save more?

By: The Dude

The Dude — Thu, 06 May 2010 19:57:45 +0000

The most imprtant rule of personal finance is to pay yourself first. Pay your self first via 401k, IRA, Money Market, Savings, etc. Second, You need to need to create a savings acct at your local bank where you can walk in and walk out with cash in your hand the same day with out paying a penalty. The savings should be atleast $1000.00, but will vary from person to person. Then create an emergency fun that will cover 6 months of living expenses if case you lose your job. The emergeny fund should not be easily accesible like a checking. Try short term savings in which you do not have debit cards and checks.
Continue to pay your credit cards, but examine every aspect of your credit cards and create multiple repayment scenarios. Choose the scenario that fits your income the best. Cut out unneeded spending and live below your means. If you find yourself always putting dining and entertainment, other intangible purchases on your credit card your living above your means and the debt will never go away. Create a budget and do not deviate from your budget. Consider putting high rate balances on cards with lower rates. In most cases the cards with the higher required minimum payments have high interest rates and/or large balances. Pay the card that is costing you the most per month ASAP while paying slightly more than the minimums on the others. Once a card is paid off roll the paid off cards payment in the payment your making on the next most costly card. Close the cards that have a high rate or annual fees or other ludacris fees.
Remember that credit cards are unsecured and if you do defualt on one you will have to deal with collectors and your credit score might take a beating, but a high debt to income ratio can be worse than a low credit rating. Do not get suckered into using a Home Equity Loan or Line to pay off credit cards. If you cant handle the balance on your credit cards, you wont be able to handle it on a home equity product and you just made your unsecured debt secured thru your home and made foreclosures a serious concern

By: Jackson

Jackson — Fri, 05 Feb 2010 10:07:30 +0000

Thanks for sharing such great post, according to me there are numerous reasons when we need such emergency funds. By building an emergency fund you will feel more secure because you are prepared for the facing any financial crisis.

By: Credit Card Criticizer

Credit Card Criticizer — Tue, 05 Jun 2007 08:08:25 +0000

Of course, it is better and wiser to use emergency fund for paying off the debt. What's the use of saving money on ambiguous purposes when you have a current danger of falling into credit card debt abyss?

By: Rodeo of Debt Reduction #14 → We’re In Debt

Rodeo of Debt Reduction #14 → We’re In Debt — Sun, 15 Apr 2007 00:41:24 +0000

[...] Money Smart life takes a look at paying your credit cards off with an emergency fund. [...]

By: pf101

pf101 — Tue, 10 Apr 2007 03:34:13 +0000

It sounds like they have bigger problems. If they can’t get control of their debt then odds are good that if they pay off the debt with the emergency fund they would just run up the debt again and then have debt and no emergency fund.

What they really need to do is get on and stick to a budget so they can get out of debt AND keep their savings.

By: Wealth Building Lessons

Wealth Building Lessons — Mon, 09 Apr 2007 20:44:00 +0000

I think they should pay down atleast half the balance with their savings and then try to build it back up.

when they’ve acheived that, they should pay off the remaining 5k and again rebuild the emergency fund.

I think the wife might have a spending problem if the husband isn’t willing to use the emergency fund to pay off high interest debt.

By: Personal Finance and Investing Blog » Blog Archive » Carnival of Debt Reduction #82

Mon, 09 Apr 2007 17:33:11 +0000

[...] Money Smart Life writes about using emergency fund to pay debt. Thoughtful question: 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? [...]

By: No Credit Needed » Blog Archive » Carnival of Debt Reduction #82

No Credit Needed » Blog Archive » Carnival of Debt Reduction #82 — Mon, 09 Apr 2007 16:24:46 +0000