Question for all you financial Guru's

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ricanprince
ricanprince Members Posts: 1,869 ✭✭
edited April 2010 in Strictly Business
ok lets say you have an individual who has approx. $10,000 in savings and due to helping out a family member they have about $2500 in credit card debt. They have good credit, pay more than the minimum, never been late on a payment, but due to helping some family out they started getting some debt whereas before they always kept a zero balance. Do you advise them to just pay the debt off from the savings or keep working out paying the debt off month by month etc
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  • msuman
    msuman Confirm Email Posts: 450 ✭
    edited March 2010
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    Depends on your interest rate and how long it would take you to pay it off. Cash is king and I am assuming that $10K is your savings and your emergency fund.
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  • southern_mr.337
    southern_mr.337 Members Posts: 87
    edited March 2010
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    pay the debt...you never want to owe anybody anything...interest is in no way your best friend but the credit card company on the other hand is looking at you like a prime rib just waiting for you to be done..these companies make their money off of interest so make it harder for them to take your hard earned money..

    Question: Does this card have an annual fee?
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  • ricanprince
    ricanprince Members Posts: 1,869 ✭✭
    edited March 2010
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    Kimi wrote: »
    Cosign, its a hit to your savings, but it will save you more in the end, becuase the longer you take to pay it off the more you will waste paying on interest. If you have the money to pay off your debt in your savings it's always smarter to use it to do so.

    well thanks for the info i appreciate it
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  • lady_c
    lady_c Members Posts: 201 ✭
    edited March 2010
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    it depends. do you work? do you contribute to this savings acct regularly? are you responsible for your own living expenses? what is the interest rate on the card? do you have other cards?

    these factors come into play bc:
    - if you only have this card or limited credit, you need to keep at least a 30% debt to credit ratio on them to get the best credit rating. you clear all balances on cards, and potential lenders look at it like you have all kind of available debt to rack up which could be a liability to them.

    -if you dont contribute to your savings regularly, then you will deplete cash for credit which is never good. esp how cc lenders have been acting closing accts, etc.

    -if you have no overhead, then you can be more flexible with your savings bc you dont need an emergency fund as much as someone who has a mortgage to pay

    id say if you have a job, pay the debt off in increments much larger than the minimum, basically in chunks. unless you have an astronomical interest rate, that changes the whole game
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  • a.mann
    a.mann Members Posts: 19,746 ✭✭✭✭✭
    edited March 2010
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    that ? Solar should let his family see him even tho Guru said that wasn't his wish

    But he was a fool to let that ? have power of attorney over ALL his affair ....something odd with that

    hold up wait....guru???
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  • a.mann
    a.mann Members Posts: 19,746 ✭✭✭✭✭
    edited March 2010
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    unsure-1.gif....................
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  • ricanprince
    ricanprince Members Posts: 1,869 ✭✭
    edited April 2010
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    great advice everyone, so once paid off, credit score should go up, correct?
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  • buttuh_b
    buttuh_b Members Posts: 13,544 ✭✭✭✭✭
    edited April 2010
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    Compounding interest is a ? when you're the one paying it. Credit card interest is waaay more than you'll make on interest on your savings. You can always save that ? back up without losing more money.
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  • blakfyahking
    blakfyahking Members Posts: 15,785 ✭✭✭✭✭
    edited April 2010
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    ricanprince wrote: »
    great advice everyone, so once paid off, credit score should go up, correct?

    not necessarily

    credit scores improve with time, not necessarily just payments
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  • ricanprince
    ricanprince Members Posts: 1,869 ✭✭
    edited April 2010
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    blakfyahking wrote: »
    not necessarily

    credit scores improve with time, not necessarily just payments

    well i already know i have a good credit score, because ive recently checked it, im just wondering that once I pay off my debt, will it go even higher, i would assume within 6 months that this would happen
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  • blakfyahking
    blakfyahking Members Posts: 15,785 ✭✭✭✭✭
    edited April 2010
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    ricanprince wrote: »
    well i already know i have a good credit score, because ive recently checked it, im just wondering that once I pay off my debt, will it go even higher, i would assume within 6 months that this would happen

    it should as long as everything else stays the same

    there are too many intangibles that effect a credit score

    paying off a certain debt can help you in one way on ya credit score, but can hurt you in another depending on the circumstances

    as long as you manage your credit balances to be way below your credit limits everything should be good......some mofos pay a balance off and then close the account, which isn't good to a FICO score
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  • ricanprince
    ricanprince Members Posts: 1,869 ✭✭
    edited April 2010
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    blakfyahking wrote: »
    it should as long as everything else stays the same

    there are too many intangibles that effect a credit score

    paying off a certain debt can help you in one way on ya credit score, but can hurt you in another depending on the circumstances

    as long as you manage your credit balances to be way below your credit limits everything should be good......some mofos pay a balance off and then close the account, which isn't good to a FICO score

    naw, i have no plan on closing accounts, for the longest I always had a zero balance, but I hit a year of some rough times, and my ? kept going higher and higher, I thought I would be able to pay it all off quickly without dipping into my savings, but I see otherwise. Im just mad at myself for not paying the ? off sooner, and instead of flushing all this money down the toilet over the past year or so. Like someone said dipping into my savings will hurt short term, but in the long run it will be much better
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