Pay debt or keep cash on hand?

[collin]

I agree with Tom above-----always pay your debts, it's more peace of mind for me to pay off my card balances and then know that if I have an emergency----I can use the credit card for that emergency. Heck, that's what I think the best use for credit cards is!! Other than that, CC companies are a bunch of thieving crooks, grabbing people by the hook.

[fatcat]

Another consideration is whether the interest paid is deductable from income taxes.If so, that lessens the cost somewhat.

[marc61]

Another consideration is whether the interest paid is deductable from income taxes.If so, that lessens the cost somewhat.

Not sure but, besides mortgage interest, what type of interest is tax deductible?

[winston]

I have been going back and forth over whether it is better to pay of the debt or keep a cushion of cash so I turned to that oracle of wisdom the internet and found an interesting article in US News and World Report:
Suze Orman and the New Rules of Credit Card Debt

The argument that Suze Orman establishes in the article that you linked to (see above) is why I supported John A's advice to you. She is bang on with her assessment Mitch.

[octagon]

I have been going back and forth over whether it is better to pay of the debt or keep a cushion of cash so I turned to that oracle of wisdom the internet and found an interesting article in US News and World Report:
Suze Orman and the New Rules of Credit Card Debt

The argument that Suze Orman establishes in the article that you linked to (see above) is why I supported John A's advice to you. She is bang on with her assessment Mitch.

Thanks Brian,yeah,I am a fan of Suze.

[schoolside]

Because I live on a fixed income I usually only have enough money to cover my current expenses but now I have a a little more than $3000 extra so I opened a little savings account so that I don't have to keep it all in my checking account(or in my pillow). I don't have a lot of debt most of it is on one credit card with a balance of $1600. The interest I pay on this card is around 7%. I could pay it all of but that wouldn't leave me much cash for emergencies.Of the $3000 I have $900 is set aside for my sons school expenses(he starts college in 2 weeks)and $1000 is for future car repairs.The other $1100 is money I was going to use to pay down by debt but now I am thinking maybe I should hold on to it for other emergencies and just pay off my credit card from the current income that goes to my checking account. I can probably pay off that card within 8-10 months. Do you think that is a better idea?

Pay an extra $1000 to the card that you had reserved for future car repair. You can put future car repairs on the card later if needed. You don't have to worry about losing your income because it's fixed and covers current expenses, so in that sense you already have an emergency fund. Suzie also warns that some people are finding their cards cancelled after they are paid in full, so you might want to keep a tiny balance on it if you don't have other credit cards.

[octagon]

Because I live on a fixed income I usually only have enough money to cover my current expenses but now I have a a little more than $3000 extra so I opened a little savings account so that I don't have to keep it all in my checking account(or in my pillow). I don't have a lot of debt most of it is on one credit card with a balance of $1600. The interest I pay on this card is around 7%. I could pay it all of but that wouldn't leave me much cash for emergencies.Of the $3000 I have $900 is set aside for my sons school expenses(he starts college in 2 weeks)and $1000 is for future car repairs.The other $1100 is money I was going to use to pay down by debt but now I am thinking maybe I should hold on to it for other emergencies and just pay off my credit card from the current income that goes to my checking account. I can probably pay off that card within 8-10 months. Do you think that is a better idea?

Pay an extra $1000 to the card that you had reserved for future car repair. You can put future car repairs on the card later if needed. You don't have to worry about losing your income because it's fixed and covers current expenses, so in that sense you already have an emergency fund. Suzie also warns that some people are finding their cards cancelled after they are paid in full, so you might want to keep a tiny balance on it if you don't have other credit cards.

That's a good idea Dwight,thanks!

[fatcat]

Another consideration is whether the interest paid is deductable from income taxes.If so, that lessens the cost somewhat.

Not sure but, besides mortgage interest, what type of interest is tax deductible?

For interest to be deductable the total has to reach a % of income then all of it is.( Not sure what the current % is)
I reached a point where the interest on my mortgage was below threshold,and couldn't deduct it
and any other interest either.I paid the balance off.Now I try to avoid any debt.

[johnallg]

Back in the 80s when I was feverishly paying off my mortgage, the people I work with thought I was crazy - "You're going to loose your tax deduction!". My reply was simple. "Let's see, I pay the bank a dollar in interest and the IRS gives me 15 cents. I'm out 85 cents. I pay off the mortgage, keep the dollar, give the IRS 15 cents, and I'm ahead 85 cents."

Obviously I was in a different income bracket back then.

[jingle_jangle]

Sounds like the same good, solid, Midwestern folk who, when told at my wedding that we were honeymooning in California, in order to find employment and housing there, responded by saying, "Aren't you afraid of earthquakes?". The answer was obvious--the risk of an earthquake was, for us back then, preferable to the certainty of awful weather seven months out of the year.

A whole lot of people must have felt the same way, because the population of LA and environs have nearly TRIPLED since then, thirty years ago.

And then, when I joined classmates.com a few years back (no longer a member) to get back in touch with my HS/college friends, it dawned on me that a huge percentage of them never left Chicago, regardless of where they might have gone for military service or college. It's the siren call of hometown, which I did not hear. Some family members still consider me to be some kind of West Coast hippie.

The first Christmas I was living in LA, when we returned to Chicago for a family visit, my sister-in-law asked, "Is it true that you can go to the beach there in the wintertime?" She was dead serious,too...

[collin]

Sounds like the same good, solid, Midwestern folk who, when told at my wedding that we were honeymooning in California, in order to find employment and housing there, responded by saying, "Aren't you afraid of earthquakes?". The answer was obvious--the risk of an earthquake was, for us back then, preferable to the certainty of awful weather seven months out of the year.

The first Christmas I was living in LA, when we returned to Chicago for a family visit, my sister-in-law asked, "Is it true that you can go to the beach there in the wintertime?" She was dead serious,too...

Yeah, I have relatives all over the world (and states) and I always hear that.....I've been living in CA most of my life, and I can count the big earthquakes on one hand....and even then, half of them I was laughing when they happened, and only the '89 SF and '94 Northridge quakes were enough to warrant damage assessment or were terrifying. On top of that----I'd rather take a big earthquake once every 5-10 years than have a "hurricane season" or tornadoes that appear like clockwork every year. yikes!

The only other reason CA is difficult is the price of homes (which is increasingly easier these days....). I love many parts of this country, but I can't think of anywhere in the US with better weather year-round (except maybe Hawaii).

I love taunting my family in the UK and east coast by heading to the beach, top dropped down on the car, in January or whatever.

[octagon]

I love taunting my family in the UK and east coast by heading to the beach, top dropped down on the car, in January or whatever.

We do that too

[ajish4]

On top of that----I'd rather take a big earthquake once every 5-10 years than have a "hurricane season" or tornadoes that appear like clockwork every year. yikes!

That's for sure....especially with, what...THREE "Tropical Depressions" out in the Atlantic as we speak....people can't fathom all time, effort & expense just PREPARING for the season.

YEP, just another day in paradise!

[octagon]

I just realised that the balance on my credit card has a 0.00 % APR not 8.00%. Still I payed it down by $1000 from savings so now I just have a $600 balance.

[collin]

On top of that----I'd rather take a big earthquake once every 5-10 years than have a "hurricane season" or tornadoes that appear like clockwork every year. yikes!

That's for sure....especially with, what...THREE "Tropical Depressions" out in the Atlantic as we speak....people can't fathom all time, effort & expense just PREPARING for the season.

YEP, just another day in paradise!

I'm sure, I'm sure. Florida must be very much worth it.

As the man says, "oh.......Think twice"