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  1. #1
    Lay the coin on my tongue SilkRoad's Avatar
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    Default Savings, finances, credit card bills...

    Wasn't sure where to put this thread but this seemed appropriate enough. If it's the wrong forum, feel free to move it, mods!

    Which of the following two scenarios would you prefer?

    -Paying off your credit card bill in full every month, but being able to put little or no money aside in savings

    OR

    -Carrying a balance on your credit card but being able to put savings aside


    Obviously the ideal is to not carry a balance on your card, and also put money aside on your savings, but let's say you're not currently finding this possible... (not that this has anything to do with my own financial situation... )

    Anyone who wants to share about how you manage this sort of thing, and why, I'd be interested
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    Was E.laur Laurie's Avatar
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    I've never "understood" the idea of having savings if you have CC debt. You could just charge up the CC in an emergency but you are paying interest on a CC AND have savings? I don't get it.

  3. #3
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    My brother somehow plays a bunch of credit cards and loans against each other and comes out on top. I'm too impatient for that sort of thing myself, and I'd be afraid that it would come crashing down. It seems like he manages well, though..?

    I agree with @Elaur, though; I don't know of a reason why you wouldn't pay off as much of the credit card with savings as possible, since it seems you'd be losing out in the long term. I figure that, in the case of an emergency, you could then use the credit card--so you still have the advantage that a savings provides. It seems that the option of paying off the card 'dominates' the alternative.

    I'm definitely open to learning more. I'm sure that there are scenarios that I'm not aware of, mostly because I'm inclined to keep my finances as simple as possible, live well below my means (which isn't always feasible, I know), etc. I prefer to have as little debt as possible, especially credit card debt; I pay for virtually everything with cash (well, debit card, anyway). I have my place paid off, but we're buying a house soon. I've come to terms with having a lil' bit of a mortgage if it means getting a place that would sustain us for a very long time.

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    Lay the coin on my tongue SilkRoad's Avatar
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    Quote Originally Posted by Elaur View Post
    I've never "understood" the idea of having savings if you have CC debt. You could just charge up the CC in an emergency but you are paying interest on a CC AND have savings? I don't get it.
    I tend to agree. My parents taught me well about this sort of thing... They think I should save if/where I can. But they REALLY drummed it to me that unless it's really really really not possible, I should pay off my CC balance every single month in full. Those interest rates are nasty.

    But I know people come at this stuff a lot of different ways and many people have what I would consider pretty frightful CC debt levels.

    So yeah...at the moment I'm more in the position of paying off my CC in full (almost) every month, but not much happening savings-wise.


    EDIT: I do think a lot of people view CC spending, and debt, as not "real money" - which is dangerous and how you can get into a really bad financial situation.
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  5. #5
    Don't pet me. JAVO's Avatar
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    Quote Originally Posted by Elaur View Post
    I've never "understood" the idea of having savings if you have CC debt. You could just charge up the CC in an emergency but you are paying interest on a CC AND have savings? I don't get it.
    I agree. Savings accounts usually earn very little interest, and credit cards have significant interest expense. Putting money into savings while building up more interest expenses ends up being a reverse investment. Usually, the same is even true of putting money into a retirement account. Of course, putting some money into savings to build an emergency fund would be good.

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    insert random title here Randomnity's Avatar
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    Quote Originally Posted by SilkRoad View Post
    Wasn't sure where to put this thread but this seemed appropriate enough. If it's the wrong forum, feel free to move it, mods!

    Which of the following two scenarios would you prefer?

    -Paying off your credit card bill in full every month, but being able to put little or no money aside in savings

    OR

    -Carrying a balance on your credit card but being able to put savings aside


    Obviously the ideal is to not carry a balance on your card, and also put money aside on your savings, but let's say you're not currently finding this possible... (not that this has anything to do with my own financial situation... )

    Anyone who wants to share about how you manage this sort of thing, and why, I'd be interested
    You need a bit of savings just so you don't starve if anything bad happens to your credit card - even if it's just frozen for a couple days or something, which can happen at very inconvenient times. The amount depends on your fixed expenses - at least enough for a month's fixed expenses, I'd say.

    If you already have an emergency savings (or you're willing to count on people emergency-loaning you money) definitely focus on the cards. Interest rates = insanity. Not sure if it's the same over there, but here if you pay it ALL you don't pay any interest at all, whereas if you pay nearly all you still pay interest on everything for the period leading up to your payment. So paying it completely is a big difference from paying it mostly.
    -end of thread-

  7. #7
    Analytical Dreamer Coriolis's Avatar
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    Quote Originally Posted by SilkRoad View Post
    Which of the following two scenarios would you prefer?

    -Paying off your credit card bill in full every month, but being able to put little or no money aside in savings

    OR

    -Carrying a balance on your credit card but being able to put savings aside
    It all depends on interest rate. If your money earns more interest in savings than you pay on your credit card balance, savings makes more sense. This is highly unlikely, though, since savings account interest rates have been abysmal for years.

    A similar question is whether to invest a sum of cash you have and buy something on credit; or pay cash to avoid paying loan interest, but now you have nothing to invest. Again, go by the interest rate.

    Best credit card scenario is to pay off your balance each month, and spend a few dollars less if possible, and put those right into savings, or ideally a more profitable investment. Common advice is to consider personal savings like any other "bill" and pay it to yourself (your savings or investment account) first.
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  8. #8
    Lay the coin on my tongue SilkRoad's Avatar
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    Quote Originally Posted by Randomnity View Post
    You need a bit of savings just so you don't starve if anything bad happens to your credit card - even if it's just frozen for a couple days or something, which can happen at very inconvenient times. The amount depends on your fixed expenses - at least enough for a month's fixed expenses, I'd say.

    If you already have an emergency savings (or you're willing to count on people emergency-loaning you money) definitely focus on the cards. Interest rates = insanity. Not sure if it's the same over there, but here if you pay it ALL you don't pay any interest at all, whereas if you pay nearly all you still pay interest on everything for the period leading up to your payment. So paying it completely is a big difference from paying it mostly.
    I currently live in the UK and I have savings in Canada I could dip into if necessary. I tend to pretend it doesn't exist though for current purposes. I feel like I should be saving more over here (or anything!) because most of what I have in Canada is due to my parent's good sense. It's a bit of a psychological thing. Money is money, but given that most of my current savings are due to my parents makes me feel like a bit of a trust fund kid. (though I'm not!) But I am going to see if I can start putting a bit more aside over here. I probably could if I were a bit more disciplined.

    I am sure I would worry more if I had no savings anywhere. Or I would rely more on credit cards. I think with CC debt some people get to a point where it's bad enough that they sort of start pretending it doesn't exist. I've heard that a lot of people are more likely to worry about it if they only have a bit of CC debt than if they have loads. Weird but true, apparently.
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  9. #9
    Senior Member Scott N Denver's Avatar
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    The only reason I can think of to carry debt and save money for something else is if you think you will need to put cash down as a down payment on something, for example a car or a house. With that said, as a previous poster pointed out, sometimes credit cards do get frozen and you'll need some money to pay for stuff until a replacement credit card arrives.

  10. #10
    Strongly Ambivalent Ivy's Avatar
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    I'd want to have a little "cushion" but if you're talking about routine saving, there's no way you're going to find a way to save that will earn you as much interest as you'd be paying on the CC.

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