invest or pay off debt?

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Mike Panic
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invest or pay off debt?

Postby Mike Panic » Sun Apr 15, 2007 6:18 am

this was just covered at GRS, kind of... but im in a different scenario then J.D. was.

i owe a few grand on a credit card, after calling amex to get a courtesy lower rate since ive been with them for several years, have never missed a payment and use the card often (5% cash back for gas, etc.), i figured it was worth a shot, ive done this sort of thing in the past. they dropped the rate w/out a fight, but only from 15% to 12.5%. what pissed me off is that weekly, sometimes more often, i get pre-approved credit card apps from amex to apply for a 0% balance transfer and rate for a year. the csr said she could do nothing, so i took the drop and went along my way.

later that night i applied for the platinum discover card w/ 0% balance transfer for a year, got approved and they moved all but a few hundred to it. now im not paying a cent of intrest on the balance until march 2008.

ive had and add to an ING savings account for a few years now, currently earning 4.5%

so... do i just not contribute as much as i normally would to ING and sleep better at night knowing im not in debt (other then my mortgage - i own my car and motorcycle outright), or so i make a few extra dollars w/ ING and stretch the credit card payments out for 10-11 months since im not paying intrest on them anyway?

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Postby Angie » Sun Apr 15, 2007 10:41 am

How much is it worth to your peace of mind to get the debt out of your life?

Say it's $3000 in debt. A year in a savings account at 5% is going to bring in $150 in interest, on the order of $12/month.

If getting that credit card bill bugs you enough that you spend more than $12/month to escape the irritation (going
out for a few beers or to a movie would pretty much wipe that out) then it's worth just getting rid of the debt.

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Postby elasticdog » Sun Apr 15, 2007 1:27 pm

I would personally pay off the debt and not contribute quite as much to your ING account. If you really wanted to, you could apply for a new card every 6-12 months that have 0% balance transfers and keep the money in limbo forever, but I doubt that would be the wisest move in the long run (for your credit or your peace of mind). I was in a similar situation some months back, and didn't want to completely cut off investing/saving until the debt was paid off, but I did send the majority of my extra money toward the credit card debt until it was gone. After that I focused on paying off my car loan, and now all I have left are some student loans. It's hard to explain the feeling of paying off your credit card completely and knowing that you won't ever have to carry a balance again...very liberating.

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Postby desertjim » Sun Apr 15, 2007 2:17 pm

I agree with Angie. The easiest way would be to calculate which would have a higher return. Avoiding the credit cards for a few months. Thus earn interest with the ING account or paying off the credit card debt and avoiding the interest you will have to pay if you don't. Based on what you said my hunch is that you will pay more in interest than you will gain by avoiding the payments for a few months. I have never tried the credit card juggling before. If you can power to you. Too risky for me. I think the thought of being free and out from under debt will also be on the pro list of getting the credit cards paid off first.

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Postby JerichoHill » Sun Apr 15, 2007 2:24 pm

The power of compounding investment is quite large. I would compromise and do both, but weight toward paying off
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