Ask Terry Questions Paying off Credit Cards vs. Saving

Paying off Credit Cards vs. Saving

By Terry Savage on November 25, 2019 | Credit/Debt

Hi Terry, I recently sold my home and decided to rent (1 year lease ends July 2020) until I find the right apartment to buy and if the market is right. I put $25k in a savings account earning just under 2% interest. I have about $12k in credit card debt ranging from 21-27% interest. I want to pay off my debt with the $25k, but I fear that I will not have that money if i decide to buy next year and also I feel like I’m throwing my money away by renting…your advice would be greatly appreciated.

Terry Says

You don’t say if you’re still working and earning money. And you don’t give me your age, so it’s a little tough to comment. But one thing is sure, you’re digging a deep hole by paying all that credit card interest. The smart thing to do would be pay off that debt — and close all but the longest-held card. Then you are truly free and flexible. And since you have such a small cash cushion, I would never advise using it all on a down payment on a condo anyway.
You are NOT throwing your money away by paying rent; you are putting a roof over your head. It’s time to do a budget and figure out how much you can afford to pay in rent — depending on your income, and age, and future plans. But having no debt and affordable rent will give you a great start. And I hope you can build up more savings on a monthly basis for any future emergencies.

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