View Full Version : Credit Card Question for you BB experts

06-23-2009, 08:25 AM
We have a Disney Visa with $2,500 balance on it. It will take me 4 months to pay this off right now.

We also have a savings of about $3,500 right now. I was contemplating paying off the Disney Visa with our savings and just paying our savings back over the next 5 months. The "but" here is that with the current state of the economy and job market, should I keep the savings and pay off the Disney Visa in 4 months or pay it all off now. I have a pretty secure job but no one knows in this economy right?

Cheshire Figment
06-23-2009, 09:12 AM
I would pay off the card. You are paying a high rate of interest on the card and getting a very low rate of (taxable) interest from the savings.

And just for discussion, let's say your card has a $10,000 limit. Right now you have $11,000 available, $7,500 on the card and $3,500 in savings. If you remove the money from savings and pay off the card you will still have $11,000 available, but this time $10,000 for the card and $1,000 from savings.

06-23-2009, 09:29 AM
With this economy, the usual way of doing things have definately changed. Even Suze Orman has changed her advice. Before - pay off all credit cards would be the standard advice. Now - make sure you have at least an 8 month emergency fund. Then pay off credit cards.

06-23-2009, 09:50 AM
I think I would keep your savings. Maybe if you want to take $500 out to pay it down a bit faster. But you only have 4 more months so I think you should keep your savings and pay it off as usual.

06-23-2009, 09:55 AM
I'm for paying off the credit cards. Get them over and done with and out of the way.

06-23-2009, 10:08 AM
We don't know if the OP has any other credit cards. What happens if she pays off the balance and Disney Visa lowers her limit to a minimum amount. Now if she has an emergency, she only has $1000 and no available credit. Just something to think about.

06-23-2009, 10:19 AM
We don't know if the OP has any other credit cards. What happens if she pays off the balance and Disney Visa lowers her limit to a minimum amount. Now if she has an emergency, she only has $1000 and no available credit. Just something to think about.
for the record, I'm a guy :).

To answer your questions. Yes I have other cards. I have an American Express and A Visa from my Credit Union. Both have high credit limits and a $0 balance

06-23-2009, 10:24 AM
If it was me I would pay off the card.

06-23-2009, 10:28 AM
Depends on the interest rate. If it is really high I might pay it off, but if it is reasonable I would go the safer route right now and pay it off monthly as soon as possible without wiping out the savings, or maybe pay half right away from savings, pay off the rest in the next month or two, and then repay the savings account.

06-23-2009, 10:45 AM
Depends on the interest...I would keep the savings and pay off the card probably. Having an emergency fund is important to me.

m&m's mom
06-23-2009, 11:05 AM
I woudl pay it off in a heratbeat. That will leave you $1000 and if you feel your job is pretty secure you can build saving right back up w/ out having to pay the interest.

06-23-2009, 11:06 AM
I would pay off the card. As long as you have a couple of options for credit, you can use those in an emergency. Your CC company is less likely to reduce limits when you don't already have a large balance on the card

06-23-2009, 11:19 AM
I would normally say pay off the card, but I just had the limit reduced on one of my cards because 2 others increased my limit (without me asking) and they had $0 balance on them -- the CC company felt I had too much available credit when they did a routine check, and cut me right back to the balance on the card. All this, even though I had been making regular payments more than the min. due -- their explanation: too many customers had been defaulting.

So, if you think you can pay it off in 4 months anyway, that's only about 1/3 of the annual interest rate. I would at least keep $1000 in savings.

06-23-2009, 11:32 AM
I would keep the savings and pay off the card over the next few months. Unless the interest rate on the card is outrageous. I think paying a few extra dollars in interest is worth the peace of mind of the savings being there. That might not be what the finacial gurus would do but thats what I would do. Now if you are paying 30% interest on the card its a different story.

06-23-2009, 12:29 PM
You are the only one who knows your true financial position.

So really, only you can decide what is right for you.

But if I were in your shoes, I would estimate the amount of interest I would pay over the next 4 months until the card is paid off.

Then decide if that amount of money is worth the peace of mind you'll gain in knowing you have your savings in tact and ready for an emergency.

You're essentially paying for the POM.

06-23-2009, 03:33 PM
Several people have posted on this board that Disney Visa has slashed their credit limits. It is possible that you will pay off the card and Chase will decide you don't need such a high credit limit, leaving you with little savings and a low credit limit. However, since you have other credit cards, I would pay off the card, provided you are reasonably secure about your job. If you have concerns about your job security (specific concerns related to your job or industry, not general "the economy is terrible" concerns), I'd be hoarding cash and would pay off the card over four months.

How much longer will $3500 in savings last you compared to $1000 in savings? How much are your monthly expenses, and what would your income stream be if you lost your job? If you do lose your job, would you have severance and/or unemployment? Does your wife/partner/SO also work? $1000 wouldn't last very long for too many people. If you were to lose your job, would the extra $2500 in savings allow you to keep your house, etc, while you find another job? Are you still contributing to savings now? Are you the type to run your CC back up once it is paid off, leaving you with little savings and a new balance? (These are all rhetorical questions - you don't actually need to post the answers - just food for thought.) It's hard to give comprehensive advice with limited info, but I do place a value on the peace of mind from being debt free, and I hate paying interest on anything!

06-24-2009, 11:08 AM
Just my opinion..but I am for paying off debt.....and build up savings....do you really have "savings" when you have debt? Put that baby to bed and work on your emergency fund.... good luck!!

06-24-2009, 01:13 PM
Personally I tend to think in worse case scenarios. What if you use your savings to pay it off, then ALL of you credit cards drop their limits. Then something catastropic happens and you have no savings or credit to bail out. Do you have a mortgage? Would you be able to pay it in such a scenario? I'd rather have the savings to cover that and possibly take a ding on my rating than be homeless. Now, if you own your house free and clear and no car payments, then I'd maybe take $1000 from savings to help the debt.

I know this is a doomsday scenario, but it is just 4 months to pay it off. Can you find other ways to help? Reduce your dining out for a few months? Yardsale? Ebay? Craigslist? You'd be surprised what people will buy! I sold a sofa table & end table that I paid $45 for 10 years ago for $125.

06-25-2009, 11:34 AM
I was very excited stumbling upon this thread as I too am going through this. In the end, I opted to keep my money in the savings. I was recently laid off and re-hired so am a bit nervous. In addition, one of my CC companies cancelled my card because I was not carrying a balance. The CC companies have gotten much tougher these days. Since your card will be paid off in 4 months, my vote is to keep the savings.