Given your experience, is Credit Card debt (18%), worth paying off outright rather than..

[Lord Xar]

I admit. I seem to take punishment to keep high liquidity but I realize the n$ I put towards my credit card every month (7k balance), I could just pay it outright and use that money (what I have been spending every month, $500) and just buying assets.. be it gold/silver or whatever. But then I am always thinking.. if things tank, I won't have the liquid i need so then I hold off on just paying it all off.. yet, nothing has gone down and every few months I am thinking.. damn, balance is still super high and its moving at a snails pace.

Pay it off (then I will have no debt, period!) and start using the money I've been paying into it and buy other assets?

 

[angelatc]

It's a no brainer, as well as an immediate 18% return on your money.

 

[dannno]

You could get a balance transfer with 0% APR for 12-18 months and form a strategy to have it paid off at the end of the term. That way if things tank in the next 12-18 months you'll still have your liquidity with you.

It will only cost about 3-4% of the balance upfront, but at least you won't be racking up the 18% every month.

 

[Zippyjuan]

One question- do you believe that your investment will be able to guarantee you a return of over 18% a year- don't forget to include taxes on gains and costs of making and selling the investment. If so- then do it. Otherwise- get rid of the debt (keeping enough money for an emergency fund- they suggest a fund big enough to be able to live on for six months in case you could not work but given the economy a year is not a bad idea- this should be a non- risky place you put that money). Personally- I don't see where anybody could get 18% guaranteed.

 

[angelatc]

You could get a balance transfer with 0% APR for 12-18 months and form a strategy to have it paid off at the end of the term. That way if things tank in the next 12-18 months you'll still have your liquidity with you.

It will only cost about 3-4% of the balance upfront, but at least you won't be racking up the 18% every month.

Dannno is actually right. If 0% cards still exist, that's the best option.

 

[Lord Xar]

I probably wasn't clear. - the 18% is interest on the card, not any sort of return. I could just use the $500 and sock it away every month or I could just use a portion and buy assets/put into retirement (gold/silver/roth/retir) etc.. but yeah, my interest on the card is 18% per month but I am just afraid of pulling the trigger and settling outright.

 

[angelatc]

I probably wasn't clear. - the 18% is interest on the card, not any sort of return. I could just use the $500 and sock it away every month or I could just use a portion and buy assets/put into retirement (gold/silver/roth/retir) etc.. but yeah, my interest on the card is 18% per month but I am just afraid of pulling the trigger and settling outright.

We understand you. If you are paying 18%, and you pay off your card, you are no longer losing 18%, which means you just gained 18%.

If you think your assets of choice are going to rise more than 18% this year, then you should pay off the card and buy them. If you don't, you should take the balance and transfer it to a no interest card. The latter choice gives you a minimum of 18% return plus allowing you to stay liquid. The former, if you're right with your speculation, will give you 18% + .

 

[TCE]

Even in a SHTF scenario, you don't want the credit card debt. Pay it off a.s.a.p and then you're no one's debt slave. The way things are going, a full-on collapse where one day your money is worth something and the next day absolutely nothing isn't likely. It is more likely to be slower than that. If there isn't a SHTF scenario for a while, you're hurting yourself, and if there is, there is still a strong possibility it will come back to bite you. Pay off the card.

 

[jazzyjey]

Pay it off.

 

[thoughtomator]

There's only two sensible ways to handle credit card debt:

1) Pay it off immediately
2) Default it

Anyone who carries a balance and pays the interest on it perpetually is a voluntary debt slave and a moron.

 

[jbauer]

why did this take 10 posts in a thread where the answer was so obvious?

 

[Brian4Liberty]

Pay it off. Never go into credit card debt. Pay it off every month, automatically.

 

[frodus24]

One credit card that I owe is Capital One. The balance is $701.43 and it will be paid off at the end of the month. I have paid off $12,000 in debt in a year and a half simply because I am tired of being a slave to the banks. I would pay it off.

I just completed my budget for the end of August. I will have about $1,100 in disposable income to invest/spend. I will sleep better at night. I will not worry about banks. I will be free. I will be soooooo happy!

 

[PaulConventionWV]

I admit. I seem to take punishment to keep high liquidity but I realize the n$ I put towards my credit card every month (7k balance), I could just pay it outright and use that money (what I have been spending every month, $500) and just buying assets.. be it gold/silver or whatever. But then I am always thinking.. if things tank, I won't have the liquid i need so then I hold off on just paying it all off.. yet, nothing has gone down and every few months I am thinking.. damn, balance is still super high and its moving at a snails pace.

Pay it off (then I will have no debt, period!) and start using the money I've been paying into it and buy other assets?

Yes, liquidity is overrated. It is uncertain what will happen in the future with fiat money, but if you have assets, you can be confident. You will be able to keep that money instead of paying ridiculous interest rates. Who spends more than they need to? Pay it off now because it's better to have solid financial basis than to hope for a rescue sometime in the future.

 

[tbone717]

The only debt that is good debt, is when the debt allows you to earn income. For example let's say you were to take out a loan for 100K at 10% interest for 5 years to purchase a business. You monthly payments on that loan will come in around 2 grand a month, but if the business you purchased was generating 3 grand a month in income, then you are ahead by 1000 a month - that's good debt.

Any other debt is bad, get rid of it. So in your case, pay off the debt. You save yourself the interest you are paying on it, and then you can use the money to acquire assets that will generate income for you.

One other point is that you refer to gold and silver as an asset. They are not assets, they are investments. Assets generate income, investments OTOH are speculative. The price of gold can go up or down. But having 100oz of gold in a safe in your bedroom does not generate income for you. Investments are good to have, but you also want to focus on acquiring assets like rental properties, businesses, etc.

 

[Roy L]

I probably wasn't clear. - the 18% is interest on the card, not any sort of return.

I think I see how you got into shoveling your money into credit card companies' pockets. The 18% is the card companies' return on your balance. That means it is a NEGATIVE return for you. Eliminating it therefore gets you an 18% return on the money you use to pay it down. You'd have to be damn lucky to get a better return than that on any asset you buy in today's market.

I could just use the $500 and sock it away every month or I could just use a portion and buy assets/put into retirement (gold/silver/roth/retir) etc.. but yeah, my interest on the card is 18% per month but I am just afraid of pulling the trigger and settling outright.

Settle it. Carrying credit card debt is financial suicide, and you clearly aren't financially literate enough to have any significant chance of outperforming the market to the tune of an 18% return.

 

[angelatc]

Yes, liquidity is overrated..

I agree with this. Especially since the OP can just start paying himself $500 a month. Not to mention that the credit card is still a fallback.

 

[Zippyjuan]

Rough, simplified numbers. Say you have $1000 you owe at 18% a year. That is costing you $180 (multiply that by the thousands in balance you have to see what it is REALLY costing you and think what you could do with that money instead of giving it away). Pay it off and you save that $180. Don't pay it off and try to invest that money and you need to make at least $180 on the $1000 investment not to have any real gains but to simply offset that loss. And as I mentioned earlier, the investment will have costs to buy and sell and gains may face taxes so you may need 25% or more return on $1000 to just break even compared to paying off the loan.

 

[Exavier]

My personal opinion

Is that you pay it off quickly but if paying it all off at once will tap all your reserved money I wouldn’t personally suggest doing that. My personal opinion is to pay it off more quickly maybe budget it to pay it off in a much shorter period of time then minimum interest. But I do think it’s safe to have a little money saved up in case of an emergency. Just my two cents.

 

[gerryb]

Is that you pay it off quickly but if paying it all off at once will tap all your reserved money I wouldn’t personally suggest doing that. My personal opinion is to pay it off more quickly maybe budget it to pay it off in a much shorter period of time then minimum interest. But I do think it’s safe to have a little money saved up in case of an emergency. Just my two cents.

Money in the bank when you have credit card debt is a waste.

Pay off the debt, as long as it is a revolving line of credit. If a disaster happens you still have the line of credit to utilize. Ditch the line of credit once your liquid reserves are back up.