My neighbor and her husband recently ran up a credit card bill of $2500 @ 8% interest. Car repairs. They have enough money in the bank, part of their 6 month family emergency plan, to clear the debt.. The wife wants to “borrow” the money from their emergency account to pay off the cc debt and “pay back” the account each month. The husband wants to just pay off the card @ $150-$250 monthly until the card is paid off.
BTW, I’m favoring the wife’s plan, only because it won’t carry any interest payments. But, I can also see the husbands side. What if a real emergency hits? Health,lay off etc. Any suggestions? Input? Maybe pay 50% and carry 50%? Any input will be appreciated.
Car repairs are an emergency, that is why you have the fund. You borrow from yourself, not the credit card company. You pay yourself as if it is a debt (because it is), and if something else comes up, and you have to miss a payment what’s going to happen? You aren’t going to call and harass yourself,then jack up the interest and payments.:)
So pay all of the bill, ASAP, then pay yourself ASAP.
Financially it makes more sense to pay off the debt as they are losing money paying all that interest.Suggest the wife calculates all the interest paid to the credit card company till the debt is paid off.. have her show her husband that amount and tell him that they will actually make money by paying off the credit card from their savings and then repaying themselves monthly including the interest…… Why pay them when you can pay yourself. In any case they would still have the credit card line of credit in case that emergency comes up before they save all the money back. And they will be earning the interest instead.