With employment numbers looking positive across a number of sectors in addition to lower taxes, numerous Americans have found themselves with extra money. For those who are carrying credit card debt, you may be wondering whether you should place it in saving or pay down that credit card balance. While every person’s financial situation is different, their money may be better spent paying down debt versus placing it into your savings account.
High-Interest Credit Cards
What most individuals do not realize is that when you pay off your high-interest credit card debt, you ARE actually saving money. Additionally, if you have a high debt load on your credit cards that exceeds 50% of the balance, then the debt could be damaging your credit rating as well. High-interest credit card debt could also make you more prone to missing a payment which can further hurt your credit score.
Compare Debt to Savings Rates
When assessing where your extra cash should go, it becomes important to compare the cost of your debt (interest on credit cards) versus what you could earn by placing the money in a savings account or certificate of deposit. In nearly every situation, you’ll be looking at credit card interest in the 20% range compared to a minuscule 1-3% interest rate on savings. If this is the situation you find yourself in, it just makes sense to pay down your credit card debt.
When Bankruptcy May Be Best
If you have been unable to pay more than the minimum balance on your credit card statements for years and have not hope in paying it off within the next 5 years, you should seriously consider filing bankruptcy in order to discharge all or a portion of the debt. Contacting a Dallas bankruptcy attorney will assets you in finding out if your situation would best be served by filing for bankruptcy protection.