Save like the dickens or pay off 0% credit card??

**Ilovesewing** · 01-07-2009, 10:53 PM

If you knew/had a feeling/listened to rumors that your spouse was going to be without a job due to the company closing down his shop in May of this year, would you save like crazy or pay off the one credit card you have with a 0% interest rate first?

This may/may not happen, or we may know more next week. Which got me to thinking about what we should do. I know what my plan is, but thought I'd ask for thoughts. Someone else usually thinks of something I haven't thought of

Just some food for thought:

1) DH is eligible for retirement. If he does get laid off he will just put in for his retirement and start collecting his pension.

2) He will be paid out in cash for a separate pension he has coming of about $15,000 once he retires.

3) He 'should' get a severance based on the 30 years he's been at his job. However, I won't count on this until I see it.

4) He should also collect unemployment.

5) Paying the bills will not be an issue. Financially we are and will continue to be fine.

6) He will look for another job, but it won't be an urgent search.

Right now we have $270 in savings. We spent all of our savings on our dd's wedding in October. I do not regret this at all, and would do it again. However, we were still left with zero in savings.

We have a credit card balance of $11,100 with a 0% interest thru sometime in 2010.

So what would you do over the next five months? Pay off the debt? Save everything you could?

Remember this is not a big surprise and it is not dire straights for us so no reason to panic. I'm just wondering what everyone else would do. I'll come back later and tell you what my plan is and why.

**SHOPGIRL** · 01-07-2009, 11:05 PM

As long as you know you'd have money coming in, I'd first fully fund my emergency fund, then take the money and pay off the debt.

Or do half and half. 2010 will be here before you know it.

**Marie78** · 01-07-2009, 11:11 PM

If I were in the same situation as you, I would make payments to my credit card ($250-$300/month) or what you could afford (more than what they ask for each month). Build a savings with the money you don't put toward the credit card and then you can always pay the credit card off if/when your Dh gets his $15,000 lump sum. If he keeps his job, then you still have been building a savings that you can pay the rest of the credit card off, before the interest rate goes up. That's just what I would do though, because it looks like you have some wiggle room at the moment.

**fixer** · 01-07-2009, 11:38 PM

I would make minimum payments and save like crazy. I would, however, make sure I followed the credit agreement to the letter to make sure I kept the zero percent money. I think, right now, cash is king. Dw and I are facing a similar dilemma. We have the money to pay off our mortgage but we chose to keep the cash. While it's not zero percent, we still make more from the money than the interest rate on the mortgage. The best sleep aid I know is money in the bank.

**dcompton** · 01-07-2009, 11:48 PM

I would make Cc payments and save like mad. And as fixer cautioned, watch that interest rate like a hawk. If you have to pay it off suddenly, you'll have the money saved to do it with anyway. Or if a crisis happens, you'll at least have some cash on hand.

**SheKat** · 01-08-2009, 08:21 AM

Save like the dickens and put the money into a high interest account, make it work for you. Then just before the 0% interest runs out transfer your savings to pay the credit card. Keeping aside a small amount so you have a baby emergency fund.

**Greebo** · 01-08-2009, 08:36 AM

Get rid of the debt. Less/no debt means less monthly expenses needed to live on when he retires.

**Ilovesewing** · 01-08-2009, 08:52 AM

Oh good, I see about everyone would do what I plan on doing. My plan for this year was to have the credit card paid off by September. Now I'll be making about $250 a month payment on the card, and throwing the rest in savings. If the job ends we'll have money. If the job doesn't end, we'll have money and can pay off the credit card.

Having a credit card doesn't bother me especially since it's 0%. Not having money in the bank does bother me. I guess I'll have to bow out of the debt reduction challenge for a while until we know for sure what's happening. I'll be making payments so the balance will go down. So I guess I'm paying down and saving up at the same time. Can't lose that way!

**Michelle** · 01-08-2009, 08:56 AM

I would get a baby EF in place and then pay off the CC first.

**mombottoo** · 01-08-2009, 09:21 AM

With the amount of the debt I'd pay it off, since the clock is ticking on the 0% interest. If the interest were for the life of the debt then I would pay it whenever.

**Denvergirlie** · 01-08-2009, 11:30 AM

I would save a 2 months of outgoing expenses in case it takes some time for retirement, pension, severance and unemployment to kick in. Everything above that would go to debt.

Once the retirement, pension, etc, etc starts coming in I would lower that EF down to $1K-$2K and throw everything else at the debt until it's gone.

**homesteadmamma** · 01-08-2009, 11:40 AM

Originally Posted by Greebo

Get rid of the debt. Less/no debt means less monthly expenses needed to live on when he retires.

Again I agree with Greebo. The less expenses you have when one retires, the better. Just ask us. We can live on our fixed income only because we are debt free. I know others who have retired that can't because of debt and end up going back to work at a job they hate. The expenses do not end when you retire and often they become more because of age.

**Greebo** · 01-08-2009, 03:20 PM

Originally Posted by homesteadmamma

Again I agree with Greebo.

I've got you on record twice now!

**scottp999** · 01-08-2009, 05:58 PM

I agree with Greebo as well. Credit Card companies have been closing accounts, reducing limits, and raising interest rates (with 15 days notice) for people that have never been late.

Most people do not realize that Credit Card balances (loans) are callable by the bank at any time. That means they can cancel your account (line of credit) any time, for any reason, and demand full payment immediatley.

They have not started to "call" in loans at this time, but some of their recent actions lead me to believe it could become a reality in the future.

If you kept your Card Agreement look at the termination section. Most of them have this type of wording:

"Termination:
(a) The Primary Cardmember or we may terminate this
Agreement, and we may withdraw your rights and
privileges in respect to your Card and the Account,
at any time without notice. If this happens, the
Primary Cardmember must pay all Debt at once and
return each Card to us at once."

from: http://www.citibank.com/canada/cards...df/cma_new.pdf

It's a Canadian link, but I have checked some of mine and the same type of language is in there.

When you sign up for a Discover card all they tell you is what they call "Important Information".

They actually say by applying you are agreeing to the Card Member Agreement that will be sent with the card. So you don't even get to read the full contract until after you apply.

Sign up for something without seeing full terms in advance....crazy!

**Denvergirlie** · 01-09-2009, 08:35 AM

I already responded but just have to chime in again.

I believe it's in your best interest to pay down debt pretty much no matter the situation. However, in this case I wondering if you have any money in the bank?

Say this all comes true and you need to apply for retirement, pension and unemployment. I know unemployment is not immediate, the soonest you would see a check is 3 weeks. My company laid some people off the weekend before Thanksgiving, but severance pay wasn't cut until Dec 31st. So those people went 5 weeks without those funds.

If this timeline might hold true how are you going to survive the 3-5 weeks with no income. A lower balance on your credit card is not going to help you at this time, you will need cash to pay the bills. Do you have a mortage? How would you pay that bill if you have no money?

So I state my thoughts again, save money until you have at last 1-2 months of cash reserves to carry you thru the time it might take for all of that other monies to start rolling back in.

You need an emergency fund!! You have possible storm clouds on the horizon and no umbrella to protect you at this time.

Come May should none of this develop, you can take those extra funds you've saved and throw it all at the debt (keeping back at least $1K as an EF - car repair, whatever). You state that this debt is interest free right now, so you lose nothing by following this plan, and in fact might earn a few dollars in interest while this money is in savings.

Have you ever read Dave Ramsey's Total Money Makeover Book? If not I would suggest trying to check it out from the library. He is all about getting free from debt, but also protecting yourself so you don't incur more debt because of falure to plan for emergencies and more so in your case a serious storm cloud.

You didn't mention if you have an EF already set up, so if you do, then ignore this and attack that debt, but if you don't have some sort of savings to possibly tide you over these uncertain weeks waiting for severance, unemployment, pension and retirement to kick in you very well might find yourself in a worse poistion come May due to lack of planning.

Good luck