Credit card v. savings

DorsetKnob

Just wondering what others would do if your credit card balance was the same as your savings balance - would you pay off the credit card and have no savings, or keep the savings and pay the card off monthly. Only talking a couple of thousand £. Thanks

pb21

Get a new credit card with a 0% balance transfer rate, then pay it off over the 0% period.

wormo

+1 the thing about using your savings is once they have gone will you be able to save to get them back up again to similar levels. Debt in itself isn't bad as long as you can service the debt.

Peddle Up!

The basics - pay off debt using savings first unless interest rates work in your favour (e.g. 0% on transfers).

lc1981

wormo wrote:

Debt in itself isn't bad as long as you can service the debt.

True, but if you're paying more interest on the debt than you're getting paid on the same amount of savings, then you're just throwing money away unnecessarily.

AchillesLeftKnee

Pay off the credit card, otherwise you're paying someone else for the pleasure of kidding yourself you've got some savings.

tiredofwhiners

Pay of the debt - but don't ditch the card as if you get into difficulty you'll need it to live off instead of the savings you no longer have.

gavbarron

Pay off the card, I assume the savings were for unforeseen expenses or emergencies and so keep the credit card for that role until you replenish the savings. Better to keep a clean slate where possible, particularly in this economic climate

DorsetKnob

AchillesLeftKnee wrote:

Pay off the credit card, otherwise you're paying someone else for the pleasure of kidding yourself you've got some savings.

Yes - youre right. At the end of the day its only figures on a screen, and as others have pointed out I can always use the cards in an emergency. Thanks for the replys.

pb21

It feels better to pay off the debt in one go, but if you can pay it off over a longer period at no extra cost (i.e 0% APR) it makes much more sense to that.

The value of the debt is reduced in real terms and you gain interest on you savings. OK these aren’t going to be major amounts (2% each one maybe?) but you might be up to £80 ‘richer’ in a year if you don’t pay it off in one go.

Frank the tank

pb21 wrote:

It feels better to pay off the debt in one go, but if you can pay it off over a longer period at no extra cost (i.e 0% APR) it makes much more sense to that.

The value of the debt is reduced in real terms and you gain interest on you savings. OK these aren’t going to be major amounts (2% each one maybe?) but you might be up to £80 ‘richer’ in a year if you don’t pay it off in one go.

THIS.

AchillesLeftKnee

pb21 wrote:

The value of the debt is reduced in real terms and you gain interest on you savings. OK these aren’t going to be major amounts (2% each one maybe?) but you might be up to £80 ‘richer’ in a year if you don’t pay it off in one go.

Explanation please

pb21

If the balance is £1000 now and in one year, but inflation is 3% or whatever then that £1000 is worth less.

AchillesLeftKnee

pb21 wrote:

If the balance is £1000 now and in one year, but inflation is 3% or whatever then that £1000 is worth less.

Worth less in relation to what?

Or, from a different perspective, how does a small percentage change in a rather abstract index of the cost of living translate into a debt being easier to pay?

Frank the tank

The £1,000 would have less buying power due to inflation.

Plus if you're fortunate enough to be employed and recieve a pay rise you'll theoretically have a little more to spend, if the rise was above the inflation rate. Hopefully the debt will by then have been transfered into a 0%interest credit card. So you're nibbling away at both ends of the debt.

okgo

Unless you're making more interest from than the savings that the credit debt is costing you then surely pay it off?

AchillesLeftKnee

Frank the tank wrote:

The £1,000 would have less buying power due to inflation.

Plus if you're fortunate enough to be employed and recieve a pay rise you'll theoretically have a little more to spend, if the rise was above the inflation rate. Hopefully the debt will by then have been transfered into a 0%interest credit card. So you're nibbling away at both ends of the debt.

Cheers. Was just interested to see how you phrased it, although I will admit it's not a term that I think is relevant to short term micro situations as, IMHO, there are far to many assumptions regarding income levels and spending patterns involved to make the concept really work.

dw300

Does anyone else have the Wonga loan ads in this thread?

Peddle Up!

dw300 wrote:

Does anyone else have the Wonga loan ads in this thread?

Not this, but on my mobile - everywhere. Dark days...

AchillesLeftKnee

dw300 wrote:

Does anyone else have the Wonga loan ads in this thread?

No, Suzuki Grand Vitara here.

beverick

wormo wrote:

............. Debt in itself isn't bad as long as you can service the debt.

If only Gordon Brown had been told that before he 'maxed out' the UK's credit card!

Bob