Credit card advice

**sinopa27** · 12-03-2009, 08:22 PM

http://finance.yahoo.com/personal-fi...inimum-payment

I saw this today and thought that the advice was a little different from what many have done here at FV. I think the author speaks in reference as if the person wants to keep the credit card.

What do you think? Do you agree/disagree?

**dcompton** · 12-03-2009, 08:48 PM

Well, I think he makes a couple of good points. First, you must have some emergency savings. How much of course varies with everyone's circumstances. Everyone here will agree with that.

However, I think his last point is well taken, and though it may get me booted out of the village -- or at least chased around a little. I have always wondered to a degree about keeping a really big emergency fund and letting the CC debt sit or be chipped away so slowly. It seemed to me that if you used more to pay down the debt, and a bigger emergency happened than you were prepared for, it could still go on the card. No one likes to lose momentum and have to go back to using a card you're trying to pay off. But I don't see that you are any worse off, except perhaps psychologically, because you have at least saved a chunk of interest in the interval. Then replenish the EF and start slogging away at the card again.

**frugalfranny** · 12-04-2009, 01:25 AM

Originally Posted by dcompton

However, I think his last point is well taken, and though it may get me booted out of the village -- or at least chased around a little. I have always wondered to a degree about keeping a really big emergency fund and letting the CC debt sit or be chipped away so slowly. It seemed to me that if you used more to pay down the debt, and a bigger emergency happened than you were prepared for, it could still go on the card. No one likes to lose momentum and have to go back to using a card you're trying to pay off. But I don't see that you are any worse off, except perhaps psychologically, because you have at least saved a chunk of interest in the interval. Then replenish the EF and start slogging away at the card again.

I won't chase you dc.....I agree with it. I haven't read any of DR's thinking -keep saying I will but..........so don't know that he would agree.

If you can save money on any interest I think it is a good thing. Think this will become much more important when all the cards start hitting the 29% rate that seems to be coming!! Hope lots of people can get them paid off before they get caught with that!

**sinopa27** · 12-04-2009, 02:21 AM

I wondered the same about having an EF and having credit cards to pay. For example, $1000 in EF and I owe $1000 on a card.

**Preston** · 12-04-2009, 03:29 AM

I'm currently working out of debt and I will honestly wipe out my EF to pay off the last $1000 on a card and re-fund the EF with the next few paychecks. The liberating feeling of being done with another card is sooo worth it.

**sinopa27** · 12-04-2009, 03:36 AM

Originally Posted by Preston

I'm currently working out of debt and I will honestly wipe out my EF to pay off the last $1000 on a card and re-fund the EF with the next few paychecks. The liberating feeling of being done with another card is sooo worth it.

OH....how I pray for the day to credit card debt free.

**a.nonymous** · 12-04-2009, 03:48 AM

Originally Posted by dcompton

Well, I think he makes a couple of good points. First, you must have some emergency savings. How much of course varies with everyone's circumstances. Everyone here will agree with that.

However, I think his last point is well taken, and though it may get me booted out of the village -- or at least chased around a little. I have always wondered to a degree about keeping a really big emergency fund and letting the CC debt sit or be chipped away so slowly. It seemed to me that if you used more to pay down the debt, and a bigger emergency happened than you were prepared for, it could still go on the card. No one likes to lose momentum and have to go back to using a card you're trying to pay off. But I don't see that you are any worse off, except perhaps psychologically, because you have at least saved a chunk of interest in the interval. Then replenish the EF and start slogging away at the card again.

Nah, the whole point of having the fully funded emergency fund is to never use credit again.
The baby emergency fund size, while too small to offset some huge emergencies, should cover the most basic, typical types of emergencies such as a car breaking down, etc.

DR stated a couple of times, the BEF size of $1k was not chosen because it covers so much, but to give you the incentive to get "gazelle intense" to get rid of your debt. Everyone knows $1k is a bit short to get by for real emergencies, so they may feel more compelled to do anything they can to knock out debt.

Another thing, for me at least, is that I don't want to use plastic. Ever. Again.
You can't imagine how creative I'd get to get around using plastic for anything that comes up. And that's because I (mentally) discarded credit card as a form of payment.

If you use credit cards as a buffer, what makes you stick to only using $1k and no more? Self discipline? Hard to maintain if you're making an exception for the first $1k.

**kita** · 12-04-2009, 06:40 AM

The most sane cc vs ef advice I have heard was here at the village I think. Emptying your fund to eliminate a cc may have been a sound idea at one time, but right now ccs are changing limits and closing cards willy-nilly. A case of bad timing would mean an emergency and no cc space or ef.

**Greebo** · 12-04-2009, 08:52 AM

This is advice for people who want to keep using debt. It's advice meant to max your credit score, while improving your financial health.

The latter advice - raid savings to pay down CC debt - is in line with Dave Ramsey who advocates only a TINY EF of $1,000 before all extra income goes to debt repayment.

**Palooka** · 12-04-2009, 04:27 PM

Originally Posted by sinopa27

I wondered the same about having an EF and having credit cards to pay. For example, $1000 in EF and I owe $1000 on a card.

If I only had 1k worth of debt and had only 1k in savings, darn straight I would drain it to pay off the debt. Peace of mind. Then I would start to build the savings again.