Should I wipe out my debt or keep some savings…?

Debt Management
1

My CD is about to mature, and I’ll have around $5,500 saved up. But I also have $6,700 in debt:

  • One credit card maxed at $5,000
  • Another credit card with a $1,000 balance
  • A line of credit with $700 left on it

If I pay everything off, I’ll have no savings left. What would you do?

2

Pay it off. No more monthly payments, and you’ll be able to save way faster without debt hanging over you.

3

Nori said:
Pay it off. No more monthly payments, and you’ll be able to save way faster without debt hanging over you.

That makes sense, but only if the debt won’t pile up again. If OP maxed out their cards once, keeping some savings might be the better move.

4

If the interest on your debt is higher than what you’re earning on savings, pay it off. Then start putting aside whatever you were paying in interest to rebuild your savings. You’ll have a buffer in no time.

5

@Scout
That’s the way to do it. I locked in a super low mortgage rate, so I put all my extra cash toward credit card debt instead of overpaying on my house.

6

Yes, pay it down. Then start setting aside money each month for an emergency fund.

7

I’d clear the $1,000 and $700 debts first, then throw $3,000 at the $5,000 card. That way, you have a smaller balance left and no extra payments draining you. Just don’t use the cards again until everything is paid off.

8

What’s your monthly income?

9

Get rid of the debt. The interest is costing you way more than you’re earning on savings. You’ll save more money in the long run by paying it off now.

10

Palmer said:
Get rid of the debt. The interest is costing you way more than you’re earning on savings. You’ll save more money in the long run by paying it off now.

I literally wrote almost the same thing before reading this. Great minds think alike!

11

Try making payment plans instead of wiping out your savings. That’s what I did for my debts, and I chipped away at them over time instead of draining my cash all at once.

12

Need more details—how much do you make each month, and what are your expenses?

13

Dara said:
Need more details—how much do you make each month, and what are your expenses?

I posted something similar, and everyone said to throw as much extra cash as possible at the debt. I make between $2,000–$2,500 a month, and my expenses are around $1,500. Credit card balance is $5,000.

14

@Bay
That’s solid advice. If you use the CD to pay it off, you’ll be debt-free in two months. Then you can focus on saving again.

15

Dara said:
@Bay
That’s solid advice. If you use the CD to pay it off, you’ll be debt-free in two months. Then you can focus on saving again.

I misread at first—I thought OP had more than $6,700 in debt. But yeah, if they throw the whole CD at it, they’ll be done with debt almost immediately. Then they can start saving with a clean slate.

16

Savings won’t help if the debt is charging you more in interest than you’re earning. Pay it off now.

17

I’d follow the snowball method:

  1. Keep $1,000 in savings for emergencies.
  2. Pay off the $700 and $1,000 debts first—quick wins keep you motivated.
  3. Put whatever’s left toward the $5,000 card and pay the rest off as soon as possible.
  4. Once you’re debt-free, build your savings back up.
18

@Nori
I have about $1,600 in savings. My only debt is a $4,890 credit card. My monthly expenses are $1,500–$1,600, and I make $2,000–$2,500 a month.

19

Bay said:
@Nori
I have about $1,600 in savings. My only debt is a $4,890 credit card. My monthly expenses are $1,500–$1,600, and I make $2,000–$2,500 a month.

You’ll be debt-free in three months if you throw all your extra cash at it. Try cutting any non-essentials to speed it up.

20

@Nori
No subscriptions or extra expenses left to cut. My only flexible cost is food, and I keep that at around $80 a week. Planning to throw $400 a month at the card starting in April while keeping some savings for a buffer.