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Thread: Bank the money in savings or pay off credit card debt??

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    #1

    Bank the money in savings or pay off credit card debt??

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    So DH and I are in the process of buying a house, we currently have a little over $25,000 in savings. We've paid off most of our credit card debt and the only one left is a Discover card which I've been fighting and paying on for a couple years now because I racked it up when I didn't know or understand the penalties and interest on credit cards. I've got it paid down to about $1400. I just got our escrow refund from the house we sold which is about $2500.

    Here is where the dilemma comes in, should I pay for our POD ($230) and then bank the rest of the escrow refund or should I pay the POD and then pay the Discover card off and then bank the remaining $800 or dollars in savings then put the payments I was going to make on the discover in savings as they come around? The card has a really high interest rate and I really just want to get rid of it because it feels like fighting an uphill battle but I'm worried that it'd look bad to the bank for me to pay off that card instead of saving the money...

    Any input here would be appreciated.


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    #2
    Always put your money where the highest interest rate is. If you have a high interest rate on the credit card, pay it off and get it done, you know? ETA: It won't look bad to the bank... the less debt you have when you go to try to buy, the better, I'm sure.
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    #3
    Pay off the card. You can't make more money by saving the $$ because your saving account has a much lower interest rate than the card. So pay off the card now and use the money later to save or invest.

    If your card's interest rate was somehow lower than that of your savings account, it would be worthwhile to save it and make a bit of $$ on the interest while paying off your card normally. kwim? I hope that makes sense.
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    #4
    It sounds like you have enough to pay off the debt and bank a little if I'm reading that right. Either way, pay off the debt that is costing you interest and then you can start banking the money that would have gone to making the payments on that debt.
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    #5
    Being that you have a relatively high amount in savings, I would go ahead and pay off anything you can with that escrow check, and save the rest, even if its only $100.


    If it were opposite, where you had very little in savings, I would say save it and continue to pay down the card. But, in your situation, paying off that card would behoove you better.

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    Hopefully someone will come in with better insight but I know when we bought our house they told us not to pay anything off until after the loan process was over (mind you we found this out right after we paid off our car and a personal loan ). If it wont cause issues in the loan process and you already have that much in your savings I would pay off the credit card.
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    #7
    Quote Originally Posted by FruitPunch. View Post
    Always put your money where the highest interest rate is. If you have a high interest rate on the credit card, pay it off and get it done, you know? ETA: It won't look bad to the bank... the less debt you have when you go to try to buy, the better, I'm sure.
    That's what I was thinking too.


  8. verabot89
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    #8
    Quote Originally Posted by HisCrazyGirl View Post
    Hopefully someone will come in with better insight but I know when we bought our house they told us not to pay anything off until after the loan process was over (mind you we found this off right after we paid off our car and a personal loan ). If it wont cause issues in the loan process and you already have that much in your savings I would pay off the credit card.
    Really? that seems weird to me! what was their reasoning?
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  9. MilitarySOS Jewel
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    Quote Originally Posted by FruitPunch. View Post
    Really? that seems weird to me! what was their reasoning?
    Our lender told us that they like to see you can make payments on time each month and also that it would complicate things when explaining where the money came from (which I thought was weird then, it should be pretty easy to show where the money comes from?).
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    Quote Originally Posted by ZivaD View Post
    It sounds like you have enough to pay off the debt and bank a little if I'm reading that right. Either way, pay off the debt that is costing you interest and then you can start banking the money that would have gone to making the payments on that debt.
    if we pay off the card and make the POD payment we'd still bank about $800 out of the $2500.

    Quote Originally Posted by TrishAFSpouse View Post
    Being that you have a relatively high amount in savings, I would go ahead and pay off anything you can with that escrow check, and save the rest, even if its only $100.


    If it were opposite, where you had very little in savings, I would say save it and continue to pay down the card. But, in your situation, paying off that card would behoove you better.
    The money in our savings is also for our down payment and closing costs on the house, so we'll be paying about $19000 of that towards the house at closing, but that still leaves us a few months worth of mortgage payments in savings in case something crazy were to happen.

    Quote Originally Posted by HisCrazyGirl View Post
    Hopefully someone will come in with better insight but I know when we bought our house they told us not to pay anything off until after the loan process was over (mind you we found this out right after we paid off our car and a personal loan ). If it wont cause issues in the loan process and you already have that much in your savings I would pay off the credit card.
    Did they explain the reasoning?


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