Is it better to pay off a credit card debt using money saved or pay it with money earned?

credit card debt
Jonathan asked:


I have a credit card debt of about 7 hundred dollars. I have money saved of about 5 thousand. I am wondering if I should pay it off from the money saved or just continue to pay it from my paychecks. I am afriad that by touching the money saved to pay it I will be tempted to continue spending this money. I also thought about restoring the money that I spend from the saved if I do use it. Is it easy to restore saved money?

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6 Responses to Is it better to pay off a credit card debt using money saved or pay it with money earned?

  1. ALyssa
    July 21, 2009 at 4:48 am

    Whats the difference? Money is money.

  2. the wiz kid
    July 22, 2009 at 1:17 pm

    i would just continue to pay it off with my pay checks if you have that much saved up. $700 isnt that much far from debt

  3. Tiny Dan
    July 24, 2009 at 4:17 am

    if you are paying interest on the credit card then definately pay it off. saved money and earned money is still money , use your money to get out of paying the interest , then save more , it is better to save than to spend , i hate credit cards , they are all about screwing you out of your money.

    i have a savings account i get paid 1.55 interest
    you can get credit cards and you pay 10, 20 or even 30 percent interest.

    it is outragious they get away with that , those people should be in prison for using people like that!

    my checking account is even worse , i get zero interest and the bank uses my money to give credit cards to people who pay them 25 percent interest to use the money the bank got from me for free. i really can’t believe it is legal.

    matt – 20 percent of $778.00 is $155.60 not $78.00 pay that loan off and save 155 a year!

  4. Omniscient
    July 27, 2009 at 9:43 am

    Pay off the credit card debt ASAP. Like another poster said, the only consideration here is the interest rate. The bank pays you almost nothing to have the privilege of holding your savings, but you have to pay the credit card company tons to borrow THEIR money. That’s a bad deal.

    Never keep savings if you have high interest debt. You are just paying out extra money to falsely *feel* richer.

  5. Matt
    July 27, 2009 at 6:09 pm

    Debt is bad, and pay it off as quick as possible. If you have $700 in debt with $5,000 saved, you’re going to lose more money if you don’t pay it off.

    Here’s what I mean –

    You’re probably getting let’s say 2% on your $5000, that’s about $8/mo in interest. Your $700 balance is probably at a high rate of 15-20% APR. If you pay that $700 over 12 months, you’re going to give the banks $78 extra, so you’ll be paying $778.

    Pay it off now, and save for the future, it’s not hard to save :)

  6. George
    July 28, 2009 at 2:02 am

    You are more then likely paying more in interest then you are earning on the money that is in the bank. Pay it off immediately to prevent from loosing your future income, at least this way you will be able to save 100% of your future income rather then loosing better then 60% to interest charges. You will re-gain that 700 dollars much faster then you will pay off the 700 with interest charges. While you are at it you should consider what other debt you may be paying interest on and and work on accelerating the pay off of it as well. A properly laid out plan will save you a lot of money – Good Luck .

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