Pay the credit card or invest?

Question

I have about $5800, $1400, $100, $40, and $500 spread across 5 credit cards. I have about $2000 in mutual funds, $400 in TD Ameritrade savings, and $1120 in an IRA.. would it be smart to take out $1200 from the Mutual Fund to pay off the smaller amounts just to get rid of them? I dont use these or any credit cards anymore... just once in a while to have activity. It really busts me that I have this debt and im doing everything to pay it off. I just feel like id rather have little savings than so much debt. What do you think I should do?? ... I also make $33,000 a year. (I do have $12,000 in a car loan which i pay every month & $37,000 in student loans which I pay every month as well - these arent the main concerns because i know i will be paying these for the next few years - its basically just the credit card debt I want gone) What is the best way to handle this??

Answer 1

i would just keep paying the Credit cards. look into which card has the highest intrest and work on that one. good luck. you sound smart, you'll be fine in whatever you do.  

Answer 2

Take a look at the program Dave Ramsey has in his books and on line.

He has really helped me.

Answer 3

First consolidate all your credit card debts into the one with the lowest interest rate, and then pay that one down with your Mutual fund because your Mutual Fund will never make a higher rate than what the credit card interest rate you are being charged. Stay away from the credit cards as much as possible because they will eat you alive.  Learn to buy real estate now that prices are coming down and in a few years when prices go up (and they will go up) you will have accumulated lots of equity which you can use to pay off your consolidated credit card.  Also, credit card interest is not deductible, home equity loans are.  Later when you sell your home all of your debts will be paid off and you will be debt free, and you'll live happily ever after.  

Answer 4

It isn't going to do you any good to have a savings that won't be paying as much as the interest you have on your cards.  Get them paid off and then start saving!  It is costing you to keep the balances on credit!  

Answer 5

1.  Make sure you have an emergency fund.

2.  Use the mutual fund money to pay off the credit cards.  They are easily charing you 15% interest, which is way more than the taxable income you are getting from the mutual fund.

Answer 6

Pay the cards off, then, monthly,  put that same dollar amount into a savings account. In a year you will have enough money invest at a rate higher than you'll get with what funds you have now. Don't cancel the cards you pay off, looks bad on the credit score. Just use them wisely. And pay the balance in full each month. I suggest you leave the IRA as is, the tax bite and penalties will hurt your bottom line.

Answer 7

debt snowball is best for you. Pay off the smallest account you have as fast as you can then add what you were paying that account to the next smallest and work your way up then go after the car note then the student loans as at least that interest payment can be taken to your tax returns

Answer 8

Pay off the credit. I don't care how good your rates are on your investments. They will never be as high as the credit card company's interest rate on what you owe them. You will end up losing more money in the end if you put off clearing the credit. Not to mention bad credit scores will ensue, preventing you from getting loans, credit cards, etc. in the future.

Answer 9

Pay off the credit cards first because the amount you make on the investment will be lost to the finance charges for carrying over the debt.

Answer 10

Cut up your credit cards, look for a part-time job to pay off your bills.

If you are a teacher, the government has programs that will pay your student loan for teaching in a certain district. Keep your savings, and get your bills down to zero.

Answer 11

Pay off your debt.  Any interest that might be gained from investments would be less than the interest you're paying on the cards.  

Answer 12

Well, okay. I love the financial guru Dave Ramsey because he makes so much darn sense. So, here is what I think based on what I have read and heard from him.

Leave 1000.00 in savings as a baby emergency fund. Take the rest of your savings (do NOT touch the IRA because there is usually penalties to taking that money out early) and put them on your credit cards starting with the smallest dollar figure first.

The reason it makes sense to take the savings out is because the interest on the debt (with possibly the exception of the student loans) is greater than you are making with the money in the bank. So, if you put that money toward the debt you get rid of about 3 interest rates that are dinging you.

After you get those paid off then you need to get the other two credit cards paid off.  Personally I wouldn't even use the credit cards once in a while. There is no reason you really need 5 credit cards, one at the most usually suffices. In fact, I would get ALL of your debt paid off before trying to do a good long term savings account.

Answer 13

Pay off the highest interest rate cards/loans first.

You say you want to have emergency money, however your credit cards most likely have a limit higher than the $1200 you have right now. So, why can't you just use a credit card for this emergency that may never happen?

Another way to think about it, you are borrowing $1200 to put into a mutual fund. The fund may get 5%, but the loan is costing you 10%. Thus, your return ends up being 5%-10%= -5%.

Pay off the highest interest rate cards/loans first.