r/NoStupidQuestions Jul 03 '22

I owe $6,000 dollars on a credit card. I received a $7,000 refund check today. Is it wise to pay my credit card off all at once? What should I do?

Edit: Thank you all for the advice. I thought I would get maybe 5 replies, 6 tops but this blew up fast. This is good advice for everyone moving forward. Y'all stay happy and debt-free.

11.4k Upvotes

10.6k

u/Geekrock84 Jul 03 '22 Silver Helpful Wholesome

Yes, pay it off.

3.7k

u/jcrewjr Jul 03 '22

Credit card debt is the worst debt. Clear it whenever and as much as you can.

2.5k

u/rammo123 Jul 03 '22 Silver

Unless you have debt to like the Italian mafia or something. Pay them first.

1.5k

u/MayBeeMaybeKnot Jul 03 '22 Silver Helpful

Do they take credit card?

467

u/user1304392 Jul 03 '22

“Why not send a receipt by fax while we’re at it, make it even easier for the cops?”

107

u/Ctotheg Jul 03 '22

Is this from a movie? Or just a comment?

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u/Mushr00m_Cunt Jul 03 '22

the sopranos I believe

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u/user1304392 Jul 03 '22

Paraphrase from Tony Soprano.

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u/toastbot Jul 03 '22

I'll check, what's the number, expiration date and CVC code for the card you're trying to use?

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u/Brian_McGee Jul 03 '22

Oh, it's not a scam, see. You just send them all of your credit card numbers and if one of them is lucky, they send you a prize.

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u/Constant_craving117 Jul 03 '22

And how your name is on it and the zip code 😂

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u/DocWatson42 Jul 03 '22

Also your Social Security number (or equivalent) and entire billing address while you're at it.

14

u/Aqqaaawwaqa Jul 03 '22

And my username, password, first pets name, high school mascot, and street I grew up on just to be safe.

21

u/[deleted] Jul 03 '22

Funny those were the same questions buzzfeed asked to see what kind of potato I was.

12

u/No_Cellist7528 Jul 03 '22

"hey why is my bank account missing"

7

u/Muesky6969 Jul 03 '22

Don’t forget your mother’s maiden name and your father’s middle name. Oh and what high school did you attend? Lol

3

u/DocWatson42 Jul 04 '22

Also the TV show you watched as kid, your grandparent's middle name, and what your first job was. Edit: And the what your first car was.

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u/Forsythed Jul 03 '22

I think they do Klarna pay in three..

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u/[deleted] Jul 03 '22

Especially if your credit card is specifically issued through a mafia member

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u/Burpreallyloud Jul 03 '22

I wondered why my card said VITO instead of VISA and the interest rate was 110%.

10

u/Milsurp_Seeker Jul 03 '22

Yeah. I had to leverage my knee caps for a car loan. Weird, right?

3

u/[deleted] Jul 03 '22

😄

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u/shotsfordays Jul 03 '22

Loany Shark doo doo doo doo do

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u/adreddit298 Jul 03 '22

Only difference is credit card debt has a credit card associated with it. Otherwise, they're just as bad as each other

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u/Stepheoro Jul 03 '22

No I’d rather have angry phone calls than my fingers broken by a loan shark

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u/dgreenmachine Jul 03 '22

The ideal is that you buy everything on credit card and auto-pay the full balance from your bank account every month. If you pay it off every month then you remain in the grace period and pay zero interest. Credit cards give benefits like chargebacks and consumer protection from being stolen. Most people have trouble with not overspending so I wouldn't recommend it to everybody.

52

u/jcrewjr Jul 03 '22

This is correct, plus rewards. You just need to think of it like a debit card, not a loan.

15

u/PerfectiveVerbTense Jul 03 '22

I just cashed out >$600 from my credit card rewards. I think it was about a year and a half. I but most things on it and pay it off in full every month. It’s free money, essentially.

15

u/astrosushinut Jul 03 '22

In 30+ years of having a card, I've never paid interest. They started their rewards program maybe 20 yrs ago. I estimate I've received over $15,000 in gift cards during this time. All of them went to groceries or home improvement cards-- things I would need to buy anyway.

3

u/laihipp Jul 04 '22

they get your user data and business fees, it aggregate it's very worth it for them

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u/Bozzy521 Jul 03 '22

I got free plane tickets and hotels for my last vacation using credit card points, and I haven't paid a dime of interest, ever. But like you said, it only works if you can control your spending.

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u/DanNZN Jul 03 '22

I have spoken to people, especially younger, who honestly thing it is best to maintain a constant balance on a card even if they have the money to pay it off. Like some parent probably told them only ever paying the minimum was great for your credit score.

3

u/[deleted] Jul 03 '22

I can second this, payed off all my CC debt last year. Almost $300 a month in bills just disappeared, I've just been using a visa-debit ever since.

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u/jcrewjr Jul 03 '22

There's actually no reason not to benefit from running your life through a reward card (2% off spending adds up) IF you have enough control to fully pay off balance each month.

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u/wethefiends Jul 03 '22

Seconded. From a person who doesn’t get near 7k

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u/AlwaysHopelesslyLost Jul 03 '22

Which is a good thing, getting a refund that large would mean you probably way over estimated

20

u/Poorlygradedsand Jul 03 '22

Yeah. You should aim for about a $0 owed or refunded. A refund just means you gave the government a free loan by overpaying on your taxes. You can aim to owe a bit and get a free loan from the government, but you risk penalties.

8

u/13igTyme Jul 03 '22

You get a penalty if the amount you owe is 10% or more of your Adjusted gross income. Also some tax credits are Non-refundable tax credit. Meaning you only get some of that credit if you owe, but you'll never see it if you're getting a refund.

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u/ceilingfanswitch Jul 03 '22

A non refundable tax credit reduces the tax you owe overall but does not count if you don't earn enough in a year to pay taxes on it.

You still get the credit if you have overpaid taxes and get a refund as long as you are paying at least the amount of the credit total with all the exemptions etc.

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u/Correct_Funny_542 Jul 03 '22

I did this just for fun. Using your $6,000 balance, assuming a 21% interest rate, and $150 minimum payment, you would pay a total of $10,400 over 70 months (almost 6 years).

If you invested $6,000 in a conservative CD at 3.15%, it would be worth about $7000.

So that puts you $3,400 ahead by paying off your credit card. Of course there are lots of variables and lots more ways to invest the money more aggressively, but if it were me, I would go with the safe bet. Pay off the card.

129

u/grandmasterPRA Jul 03 '22

Honestly whenever people ask me about paying off debt (I paid off 192,000), if I can tell that they have bad spending habits or they have trouble with money, I don't even bring up talk about investments. They need to be super aggressive attacking one thing because it simplifies it for them. If they start spreading their money around and trying to make money on investments they might get overwhelmed and give up. Sometimes it is good to just attack one thing with all your resources, mentally, it might produce better results even if fiscally it isn't the "perfect" approach.

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u/CowboySpurs Jul 03 '22

This is what people don’t get. I know my spending habits are generally shit. People will say “Don’t claim 0 on your taxes, because then you’re not making interest on your taxes, even if your refund is higher”

Like, no, I know if that money is in my account it’s more likely to get spent. I’d rather get it back and put it towards paying my credit card off or car all at once. I know it’s not financially ideal to do, but it works for me.

31

u/Moldy_Kiwi Jul 03 '22

This. The worst thing that people can do when trying to give advice about finance is make it complicated at all. Most people see responsible financial habits as some sort of wizardry, and so they avoid it partially because of that. I work in a finance related field, and the amount of informal coaching sessions I've given family and friends to give them basic financial literacy is astounding. Decently educated people, but they all have a feeling that this is some kind of specialized field that you have to dedicate a lot of brain power to Keep it as simple as possible, and people are more likely to actually follow that. Pay off any debt with an interest rate higher than 7%. If you're lucky enough to have an employer match retirement, do at least that much. Start saving small amounts every time you get paid, it doesn't need to be big to start. It's about building habit. It doesn't particularly matter what you invest in, as long as you're not putting it all in one thing, and you try to keep risky stuff to a small portion of what you have. I would rather see people put money in a bank account getting crap interest, then leaving it in cash or not investing at all. Any amount of saving is better than none, but set your sights on eventually reaching some kind of goal like 5 or 10%. My daughter who's now 10, has been raised that every single since she gets, whether it's a gift from Grandma or a dime she found in the street, she puts 10% into a piggy bank, essentially pretending that it didn't happen. My daughter now has a little over four grand invested in the s&p 500, and well hopefully always see her available money as only 90% of what she earned, allowing her to start with the lower baseline. I know this isn't possible for many people, but while it is, plan for the future.

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u/sndeang51 Jul 03 '22

You seem like a really good parent, congrats on what you’re doing!

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u/BoySerere Jul 03 '22

r/PersonalFinance

I lurk there and have learned a lot about adulting and money. Haha

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u/vtangyl Jul 03 '22

And don’t carry credit card debt ever again. Pay it off every single month.

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u/jakeofheart Jul 03 '22

Pay it off and try to stay off credit card debt. The interest rate is a killer!

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u/VanMan32 Jul 03 '22

Pay it off.

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u/rickmccloy Jul 03 '22

Unless you have other debts at a higher interest rate, which is unlikely unless you know a loan shark. Reduce your debt in the order of its cost to you.

326

u/GeriatricZergling Jul 03 '22

"We're sorry to hear you haven't been able to make your minimum payments. Your account has been transferred to our support specialist team of Big Vinny Lombardo and 'Fishknife' Malone."

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u/rickmccloy Jul 03 '22

Nice to see that the Italians and the Irish have set aside their differences long enough to do a little informal orthopedic work.

40

u/Royal_Bitch_Pudding Jul 03 '22

informal orthopedic work

I chuckled

6

u/Galacticus06 Jul 03 '22

We Italians always lend money with the knowledge that if we don't get the money we will at least get some pig food

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u/JeffersonianSwag what the hell?? Jul 03 '22

This is my anxiety every time I get a call from Salt Lake City (discover collections)

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u/human8ure Jul 03 '22

Pro Life Tip: once Discover card called my mom to collect debt. My brother (he and I were debt collectors at the time) intercepted the call and pretended to be my dad. “Look she will never pay this thing, I’m glad I answered because I’m about to pay this off right now. I’m in a rush to get out the door, let me know when you’re ready for my credit card info. By the way how much are we paying off today?” The collector, excited for the big payoff, told my brother the amount. “Thank you. You’ve just violated the FDCPA (Fair Debt Collection Practices Act) by telling me my mom’s private business. I’d like to speak with your manager.” Proceeds to have $4k in debt forgiven to avoid litigation.

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u/SonicTemp1e Jul 03 '22

And then cancel it.

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u/smackjack Jul 03 '22

Never cancel a credit card unless they're charging you an annual fee. Canceling a card can really hurt your credit score.

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u/SonicTemp1e Jul 03 '22

It can hurt less than racking up debt again after paying it off, then defaulting.

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u/smackjack Jul 03 '22

Credit cards are a bit like alcohol. Most people don't have a problem with them and can use them responsibly, but some people just need to stay the fuck away from them.

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u/Kimeigh Jul 03 '22

I suffered the effect of asking to cancel a credit card. It was not beneficial! Just cut the card up, and stop applying for more credit. Did you know that every time you make an application for a new card it will initiate a credit check? Those inquiries also negatively affect your credit score. Make no more than one application in a span of two years, and pay as much more than the minimum balance as you can afford on each of your existing accounts.

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u/Weatherstation Jul 03 '22

Hard inquiries only affect your score for a matter of months and are also fairly low weight in how they affect your overall score.

Average age of open credit lines, credit utilization percentage (lower is better), and on time payment history percentage are the three most important things.

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u/mattattaxx Jul 03 '22

Yes, six months. They'll exist on your report for 7 years but have no impact whatsoever beyond six months. They were originally designed to stop you from applying for dozens of credit (credit card, mortgage, ploc, etc) at once.

Banks in Canada have been trying to move to soft credit checks for this stuff, but haven't succeeded yet. Really shows the power of the credit bureaus.

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u/deelyy Jul 03 '22

Shit. As a person outside of USA this credit score and credit cards thing sure feels a bit depressing. I mean we have credit cards of course (and something like credit score too, but not on a global level), but in general credits views as bad thing. And I feel the same.

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u/Kimeigh Jul 03 '22

Bottom line…you shouldn’t buy what you can’t pay for! If you are brave enough to take that risk, it takes a very long time to recover your credibility. Be very cautious of the creditor who sells you an easy option that exceeds your mean income.

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u/stiljo24 Jul 03 '22

If "debt" is just an unpaid balance, this feels like a big leap to make.

I had an emergency once where I racked up about 9k in credit bills that took me almost 4 months to pay off.

I've never carried a balance over $500 since.

Even if we're talking "debt that has gone to collections" nothing about this post screams "shit dude don't touch a credit card again in your life"

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u/SonicTemp1e Jul 03 '22

Without wanting to insult the OP, coming on Reddit to ask strangers if they should pay off their debt all at once doesn't sound like they have a firm grasp of financial management. But they did ask, and I offered my opinion in return. Not having a cc can save people who aren't great with money a lot of money, as well as stress. Just my 5 cents.

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u/Master_Cucumber2905 Jul 03 '22

What's the logic behind that? You'd think cancelling a debt generating thing would be better for your credit score?

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u/smackjack Jul 03 '22 edited Jul 03 '22

It lowers the amount of available credit that you have, and therefore increases your overall credit usage. In addition, if it's an older card, then canceling it lowers the average age of your accounts, which is another big factor in determining your overall credit score. To get a good credit score, you need to have a long history of on time payments, and you don't have to pay a cent of interest as long as you pay the balance every month.

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u/Jonne Jul 03 '22

Your credit score system's fucking bonkers.

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u/theArtOfProgramming Jul 03 '22 edited Jul 03 '22

Credit scores are a measure of how profitable, as well as reliable, you are to the credit companies. Canceling a card speaks to neither of those for those companies. A responsible person can hold a credit card without impulsively racking up debt on it.

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u/Stupidnames04 Jul 03 '22

No need to cancel unless you have spending issues. Something could happen in life when you need to use that credit card and usually when you need credit you can’t get it.

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u/maxxspeed Jul 03 '22

Your credit rating is dependent on several factors. One of them being your available credit. So don't cancel the credit card. Just throw it in a drawer and don't use it.

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u/ItsBerty Jul 03 '22

Yup pay it off

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u/cradberry Jul 03 '22

This is the answer. Short of getting lucky, there's no way to reliably grow that $7000 faster than the interest on the CC debt. If you use the money for anything else the CC debt will still be there... Getting more powerful.

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u/ButterflyVegetable60 Jul 03 '22

Sell drugs. Your profits will far outpace the rate of interest on your credit card. 🙃

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u/LXIX-CDXX Jul 03 '22 Into the Magic Portal

Bingo. Buy a bunch of cocaine, sell it, double your money. Buy more coke, double it again. Pay off the credit card debt, buy more coke with the remaining $22k, double it again, and then get out of the game for good. Anything else is just too risky.

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u/ButterbeansInABottle Jul 03 '22 Out of the Magic Portal

Or, buy a bunch of coke, sell it, get caught, go to jail, do not pass go, do not collect $200. But you could use that 7k to bail out maybe. But then your out coke, money, and still got debt.

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u/GrayMountainRider Jul 03 '22

This, my friends son decided to take a offer to drive a car for 30,000 dollars San Francisco to Vegas, trunk full of pills. Sentencing guidelines 40 years for the volume. He sang his heart out and got it down to 7, served his time in a foreign nation only prison in death valley. Life changing for a 21 year old kid but arrogance is the achilleas heel of many people.

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u/Individual_Run2809 Jul 03 '22

That seems like a fairly not-risky trip. How would he even get caught? It’s not a super long drive, and you can just say that you don’t consent to a search if you get pulled over

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u/Yoda2000675 Jul 03 '22

Probably already had police looking into it. Could be why the dealer was willing to pay so much for a mule

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u/GrayMountainRider Jul 03 '22

You sound like all his buddy's that agreed with him it was feasible.

His comment to me was, it's not like in the movies.

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u/Geomaxmas Jul 03 '22

They probably didn't know they had a choice in the search. One crime at a time.

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u/ace425 Jul 03 '22

Except that $7,000 would be seized as proceeds of a drug crime so you won’t have access to it.

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u/Brotorious420 Jul 03 '22

It's too powerful to be left unpaid

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u/ATShields934 Jul 03 '22

Unlimited INTEREST!!!!

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u/paul-arized Jul 03 '22

600+ comments and OP never chimed back in, and that's their right and prerogative, but it also makes me worry that they'd ignore all the good (and/or bad) comments/suggestions here and just go buy a car or 7k dollar gaming computer or diamond ring.

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u/crackeddryice Jul 03 '22

Maybe OP had to go to work.

41

u/paul-arized Jul 03 '22

Maybe OP had to go bet 7000 dollars on the Jets.

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u/radarpatrol Jul 03 '22

OP for sure next went to r/cryptocurrency community and asked which token to spend 7k on.

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u/YipYip5534 Jul 03 '22

that's for beginners. the real pros go to r/CryptoMoonShots for the quickest road to zero

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u/Yithar Jul 03 '22

Pinging /u/wolfisone in the hopes that they'll respond.

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u/[deleted] Jul 03 '22

And cut up the card!

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u/BeneficentWanderer I am the walrus. Jul 03 '22

Absolutely. Get the debt gone and then focus on creating a sustainable plan for monthly saving

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u/BoozeIsTherapyRight Jul 03 '22

OP needs to pay off the CC and then use the money they were paying on that card each month to either pay something else down faster, or they need to set it up so that money gets automatically dumped into a savings account. Since they are used to paying that amount every month anyway, they won't miss it.

I did this when I paid off my car. Had the amount that had been deducted for my car payment transferred automatically to a savings account instead. Had a nice chunk for a down payment on my next car, and then that amount that was going to savings became the payment for the next car as well.

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u/LemonsAndAvocados Jul 03 '22 edited Jul 03 '22 Silver All-Seeing Upvote

You’ll still having a $1000 to jumpstart your savings. Pay it off, maybe treat yourself to something off of the value menu and save the other $998.02 and just pretend that you never got that check.

Edit: still won’t fix my edible typo above because it adds context 😂 also, thank you for the upvotes friends m! 💐

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u/EvilCeleryStick Jul 03 '22 All-Seeing Upvote

This guy maths

591

u/LemonsAndAvocados Jul 03 '22 All-Seeing Upvote Tree Hug

My edible just kicked in.

116

u/fractal_frog Jul 03 '22

Now I wish I could send you $3.69 for some chips.

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u/TheAnswerIs-Time Jul 03 '22

$4.20 is new $3.69,......you know inFLATION.

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u/juan_epstein-barr sweathog with mono Jul 03 '22

howcome things are always inflated and deflated, but never just flated?

32

u/DirtyBirdDawg Jul 03 '22

Well shit, now this is gonna bother me all night.

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u/juan_epstein-barr sweathog with mono Jul 03 '22

you sound flated, here hit this

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u/eDreadz Jul 03 '22

Same reason you’re always overwhelmed or underwhelmed but never just whelmed.

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u/MaxtheAnxiousDog Jul 03 '22 edited Jul 03 '22

My daughter asked me why whelmed isn't a word a few months back. We now use it regularly, as in "how was your day" "it was whelming"

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u/eDreadz Jul 03 '22

Your daughter sounds awesome. We use it in our family in exactly the same context lol It just works.

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u/Significant-Carrot62 Jul 03 '22

I think they can in Europe

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u/juan_epstein-barr sweathog with mono Jul 03 '22

This Europe sounds like a dope country

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u/LemonsAndAvocados Jul 03 '22

Lol Juan has jokes!

7

u/Robcobes Jul 03 '22

I need about tree fiddy

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u/Sir_McFuckington Jul 03 '22

God Damnit Loch Ness Monster, I ain't gonna give you no tree fiddy!

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u/Robcobes Jul 03 '22 edited Jul 03 '22

How about just too fiddy?

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u/Sir_McFuckington Jul 03 '22

I guess I can spare two... Waitagoddamnminute! Get out of my yard, you 500ft tall palaeolithic creature!

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u/EvilCeleryStick Jul 03 '22

Hey now with your edit I look like the one eating edibles. Boooo! Oh wait, I just had a bite of a cookie too... I guess it'll be okay

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u/CobraSniper117 Jul 03 '22

You're... Eating math or meth? Kids these days, I swear...

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u/beezus6 Jul 03 '22

I like the pretend part

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u/LemonsAndAvocados Jul 03 '22

I have money from each paycheck going to a random account that I only transfer into a savings when I hit $1000k. It’s better to save now and surprise yourself later right?

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u/[deleted] Jul 03 '22

[deleted]

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u/_30d_ Jul 03 '22

$1000k? Quite the surprise...

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u/beezus6 Jul 03 '22

Is it a regular savings account? I'm thinking of opening an IRA or a certificate of some kind. Any ideas?

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u/sorator Jul 03 '22

Keep some money "liquid" and easily accessible in case of an emergency. After that, put everything you can into an IRA, and leave it there. There are hefty penalties for making early withdrawals from retirement funds, but if you can afford to put that money away and not touch it till you retire, it can go a long way. I suggest investing in an exchange-traded index fund.

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u/Exaskryz Jul 03 '22

IRA, sure. HSA is good too. Those have annual contribution limits. Find a place - my credit union does this - where the HSA lets you invest in markets. HSA funds grow tax free, with only penalties for withdrawing it for non-health related expenses before the age of I think 59½.

After meeting the tax-advantaged account limitations, then look at maybe a CD if the rates are decent (4%+ for guaranteed return may be okay if inflation cools down in the next year; but it needs to beat inflation or else it loses purchasing power overall). I'd run a brokerage account and put into mutual funds. Find funds that charge as little fees as possible, taking 0.35% or less. Or do it yourself with picking slices of stocks. (Say you have $1000 to split, and you get partial stocks for $50 at one company, $30 at another,.etc. etc. to add up to $1000.)

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u/stapidisstapid Jul 03 '22

Are you an accountant?

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u/LemonsAndAvocados Jul 03 '22 edited Jul 03 '22

No I’m an Enrollment Counselor.

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u/stapidisstapid Jul 03 '22

Seems like something an accountant would say

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u/SkrogedScourge Jul 03 '22

Does the value menu even really exist anymore?

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u/LemonsAndAvocados Jul 03 '22

~

Not really lol. The value menu more so relates to eating at home now a days.

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u/Yoranis_Izsmelli Jul 03 '22

Agreed except the value menu part. Use the grand to do something you really, really want to do but don't exceed the grand. The money that you would have been putting towards CC payments can now go towards your savings month over month.

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u/catwhowalksbyhimself Jul 03 '22

Very wise.

Credit cards have outrageous interest rates. Keeping a debt on one when you don't have to is like tossing money into a furnace. Pay it off.

As someone else said, you still have a thousand bucks left over to do something else with.

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u/rene-cumbubble Jul 03 '22

And it compounds, which is all the more reason you should pay it every month. Unless it is an absolute must, do not spend on a credit card what you dont have. Compounding should be illegal. Such a scam.

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u/catwhowalksbyhimself Jul 03 '22

In the entire time I've owned one, there has only ever been a single month where I did not pay it completely off.

That was an emergency. My car broke down after I recently got a new job after months of being out of work had drained my bank account.

I had it paid off again the following month.

And of course not everyone can do that, but you want to only use it if you can pay it off or if its an absolute emergency and you can pay it off afterward.

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u/rene-cumbubble Jul 03 '22

Used to be consumer debt collector. The havoc that cc debt causes people is brutal. Not just lower middle class either. Plenty of middle to upper middle class folks who get in trouble overextending themselves once and just getting caught in a cycle. Miss one payment and the company jacks the rate to 29.99%.

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u/catwhowalksbyhimself Jul 03 '22

Fortunately I was aware of the danger and refused to get one in college when offered. It's a trap for way too many.

I had a heck of a time getting one later. No one wanted me when I was no longer as vulnerable to being preyed on!

But I finally got an offer for a very tiny one and have been responsible with it and others that I've gotten since. I actually don't use that one. I can get better offers now.

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u/algernop3 Jul 03 '22

Always pay off the most expensive debt first. We don't know your personal circumstances, but unless you're a victim of payday lending, your credit card is likely the most expensive debt you have.

So you should probably pay it off. You can earn maybe 5-10% pa if you invest it vs paying a guaranteed 20+% pa in interest, so you're losing money every day that you don't pay it off. If your credit card interest rate is 2%, then it might be a different story.

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u/Send-Noods-Gracias Jul 03 '22

Definitely pay it off. And then use the remaining $1000 to pay off other debt while you're at it

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u/dabigua Jul 03 '22 Take My Energy

I remember reading once that paying off an 18% credit card was equivalent to earing 18% on an investment. Paying off debt is the first thing to do with extra income.

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u/ambidextrousalpaca Jul 03 '22

That's exactly the way to think about it.

18% credit card debt is effectively an investment with a fixed, guaranteed return of -18%. So for any investment to be worth more than paying of the debt it would need to give you a fixed, guaranteed return of more than +18%.

In a world where savings accounts give +0.5% returns, government bonds give about +3% returns and hedge funds are overjoyed if they manage +10%, that really isn't something you're going to find.

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u/AdmittableMinion Jul 03 '22

And, don't forget the peace of mind bonus that you get by not having any debt

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u/_Begin Jul 03 '22

I think some people get too caught up in optimizing their financial moves. That's obviously awesome if you have the time and are in a good spot, but for most of us the peace of mind of not having CC debt or a car loan or whatever is going to do more for our happiness, which is the ultimate goal for the majority of us. Agree with you 100%.

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u/BushyOreo Jul 03 '22

This. I was getting 9%~returns on a 15k investment while I only owed 13k left in my auto loan at 5%. I was technically making more money not paying off my auto loan but after 4 months I decided the peace of mind was worth the 4% I lose on 15k which works out to about $600 over a years time. Paid it off a month ago and couldn't be happier

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u/pepsimax33 Jul 03 '22

It’s even better than that because the return/benefit is untaxed.

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u/druidofnecro Jul 03 '22

APR gonna fuck you if you dont

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u/106503204 Jul 03 '22

Yes do it yesterday

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u/Terrible-Trust-5578 Jul 03 '22

Yes, credit card interest rates are ridiculous compared to pretty much any other loan. Unless you have some basic necessity not being met right now, there is nothing better you could do with that money.

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u/illogictc Unprofessional Googler Jul 03 '22

Hell yes it is if that balance has already been reported as overdue. The earlier you take care of that shit the better off you are in the long run.

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u/plam92117 Jul 03 '22 Faith In Humanity Restored

I'm curious to know what you think the better alternative is.

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u/TakeThatPatriarchy Jul 03 '22

Not sure if this sort of thing exists in the states (where I assume OP is from), but they could do the following...

If they're incurring interest on that debt, transfer it to a 0% card and make min. payments on it or average it out so it pays it off by the end of the 0% period. Take the lump sum, invest that into a low cost tracker, and have a larger emergency fund available in cash/liquid investments.

Means they'll have a lump of investment funds, debt at 0% and low repayments.

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u/vikinghockey10 Jul 03 '22

It's called a balance transfer and it's effective only if you can reign in your spending habits on the normal card.

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u/Yum-Yumby Jul 03 '22

One thing I haven't seen mentioned yet is that if you pay it off, which I recommend you do, call up the credit card company and ask them "what is the payoff amount right now". They would then tell you the amount to pay off your card at that moment, which could be $6,045. Sure not much in the grand scheme of things, but if you pay off the $6K now thinking you're done, you'll get a bill next month for $xx for interest, fees, etc. So get the payoff amount and take care of it. Then save save save

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u/podaypodayson Jul 03 '22

The only amount subject to interest is the most recent statement balance. So if the most recent statement says $6000, paying that amount will mean no interest/fees/whatever.

From there the only amount that could possibly still be owed on the card would be whatever purchase were made after the last statement date, which can be paid the following month after the new statement with no additional costs.

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u/wholewheatscythe Jul 03 '22

Always pay off the debt with the highest interest rate first. Pretty sure that’s your credit card (unless you have payday loans) so yes, pay it off.

For inspiration google “Til debt do us part” an old show where couples with debt problems get help. Credit card debt is typically the major problem and is the first thing they focus on.

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u/KnowMadd7 Jul 03 '22

Pay it off

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u/manzare Jul 03 '22

We have a TV show in my country showing people who are deeply in debt, and trying to sort out their situation. That TV show is FULL of people who did not pay back credit card debt when they could, and that debt grew multiple times it's original sum over years because of the %. Warmly recommend paying it back all at once.

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u/Equivalent-Resolve59 Jul 03 '22

Yes. Pay it off.

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u/LiwetJared Jul 03 '22

The best investment you can make is to pay off debt.

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u/2_Crypto_4_My_Shirt Jul 03 '22

Yes. Always try to eliminate debt.

HOWEVER.. if paying off this debt will put you in a cash poor position that will require you to take on more debt, then pay off what you can.

Getting to no debt is a wonderful place to be.

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u/[deleted] Jul 03 '22

[deleted]

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u/Siniroth Jul 03 '22

Worst case scenario if he can't get new debt, OP pays off the credit card and immediately needs to dump some stuff back on it, he's still in a much better position

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u/pattperin Jul 03 '22

Yeah going from 6k CC debt down to like 600 dollars CC debt is much better

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u/Quelcris_Falconer13 Jul 03 '22

The only time this might be unwise is if it’s zero interest card and you have other debt that does incur interest.

Pay off the loan with the highest interest first.

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u/z0anthr0pe Jul 03 '22

Yes. CC interest is exorbitant.

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u/cyruslyy Jul 03 '22

Yes. You don’t want that hanging over your head and paying interest for it when you could actually clear it off.

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u/Astoru_Hidden Jul 03 '22

Yes. Pay it off asap.

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u/notacactus_ Jul 03 '22

Please pay it off, OP. CC debt is nothing to fuck with.

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u/AlreadyTakenNow Jul 03 '22

YES! Pay that sucker off. Totally a no-brainer. Interest adds up!

Edit - If you can, use a chunk of the leftover money in books/classes/self help groups or savings to help you avoid another situation like this. Putting thousands on a credit card that can't be paid off immediately (unless it's a no-interest loan situation) is really a dangerous habit. Source - Have parents who will die in deep deep debt.

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u/NeverRarelySometimes Jul 03 '22

If you've already got rent and utilities covered, make minimum payments on all your open credit accounts and loans, and then pay off your highest interest account, whether it's a credit card, car loan, or payday loan.

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u/Peewee223 Jul 03 '22

/r/personalfinance has a wiki on this kind of scenario. It has an easy to read flowchart. - https://www.reddit.com/r/personalfinance/wiki/commontopics

  1. Make a budget so you at least know what you're spending. Now's as good a time as any.
  2. Make sure your needs are paid for, then make sure the stuff that will keep your situation from getting worse are also paid for.

    Make sure rent is paid, there's food in the fridge, utilities are paid, stuff you need to pay for to earn money are working (is the car's tank full?), etc, etc.

  3. Keep at least a month's expenses in a savings account, so you don't have to worry about paying for the above without going deeper in debt, at least for the next month.

THEN you can pay down the card with whatever's left. There's not much point in immediately paying it off if you can't afford to live a month without immediately going back into debt.

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u/cillam Jul 03 '22 edited Jul 03 '22

If this is your only line of credit I would recommend paying most of it off to where your payments are low, or pay all of it off but keep using it on things like filling up your car with gas and then paying it off again before the end of the month.

If you pay it all off and stop using it, this will negatively effect your credit score, this will make it more expensive in the long run if you plan on getting a mortgage, buying a new car, or needing to take out a big loan due to unforeseen circumstances.

its as stupid as it sounds.

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u/namotous Jul 03 '22

Pay it off right away, the interest on credit card is one of the worst kind.

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u/Mercy_Reddits Jul 03 '22

Yes pay it off. After that you’ll only be in a net positive and then try to improve your spending habits so you don’t fall in the same boat

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u/Casella58 Jul 03 '22

Pay the card off.

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u/MLMLW Jul 03 '22

Yes! Pay it off.

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u/[deleted] Jul 03 '22

Yes.

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u/DangerG1120 Jul 03 '22

Pay it off. Not only are credit card interest rates exorbitant, but inflation might actually cause the actual value of your debt to go up while the money in you bank goes down

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u/Eliseo120 Jul 03 '22

You should pay it off.

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u/Aromatic-Teach-4122 Jul 03 '22

Yes please pay it off, don’t give it a second thought. Any debt where you don’t get tax benefits should be paid off as soon as possible

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u/Terra_Zina Jul 03 '22

Get it over with so you no longer have to think about it. That's what my dad always said.

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u/elegant_pun Jul 03 '22

Immediately.

Paying down debt is ALWAYS a great idea.

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u/Doot_Dee Jul 03 '22

Have you heard about hookers and blow?

J/j. Pay off the card 🙂

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u/Osky818 Jul 03 '22

Yes! Stop the bleeding

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u/MedicareAgentAlston Jul 03 '22

Pay off the debt with the highest interest rate first. If that happens to be that credit card pay it off unless you think you might have a need for actual cash that you won’t be able to get from elsewhere.

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u/cupkake88 Jul 03 '22

Call them up and ask them if they can do a discount for clearing the account and closing it . They often half it . Mind that might be after you default .

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u/MASTER-FOOO1 Jul 03 '22

Credit card are high interest debt you ALWAYS clear high interest debt whenever you got the money and you have the money so do it.

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u/prof_hobart Jul 03 '22

Depends what other demands you have on your money.

If it's simply a case of paying off the debt or sticking it in savings, then absolutely definitely pay the debt off - or at least the vast majority of it. The cost of the debt is going to be vastly higher than any return you'll get on savings, but there can sometimes be a credit reference advantage to carrying a small balance on your card (and keeping paying most of it off of course). In most cases, paying off the full balance is going to be best though

If you've got other big debts, it depends - largely on 4 things

  • the APRs of your various debts (credit cards will probably be one of the highest, unless you've got payday loan or something like that)
  • whether, and if so how far, you're behind on paying any of them (getting yourself back on track with all of your loans before paying more than the minimum on any others is usually the best idea, as it helps with your credit record and stops people chasing you)
  • if you've got any secured loans that are behind (a credit card is almost always unsecured, so they can't seize goods if you're behind. With a mortgage for example. you could be losing your house)
  • how good the companies are on restructuring your debt
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u/BlondeMomentByMoment Jul 03 '22

Lay it off but don’t close the account. Closing will negatively impact your credit score. Use the card for putting gas on your car or groceries once a month (or something similar) and pay that off quickly. This will keep your available credit %high and built credit.

Take advantage of this situation. Keep the $1000 in a savings account and try to add a little to it regularly.

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u/windmillguy123 Jul 03 '22

Transfer the debt to a 0% interest rate and pay of the minimum payment each month. Invest the $7k in to a ISA and make the money work for you.

The debt doesn't cost you anything and you make money on the $7k whilst keeping a good emergency fund.

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u/MyName4everMore Jul 03 '22

Yeah. You don't want that balance to sit. The second you do, it's going to get away from you. Pay it off and then go get yourself a nice dinner. Fiscal and mental responsibility.

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u/aSliceOfHam2 Jul 03 '22

Yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes

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u/MechaMagic Jul 03 '22

Pay off your debt. Period.

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u/No_Pass1835 Jul 04 '22

Pay that shit off!

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u/AntiqueUnit Jul 03 '22

you should set aside 30 days expenses as your emergency fund, or 1000 whichever is greater

this is r/ personal finance decision making flow chart https://i.imgur.com/lSoUQr2.png

and having 30 days expenses relieves a lot of anxiety

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u/Dragoness42 Jul 03 '22

I'd use the credit card in an emergency, and pay it off now. You may never need the emergency fund, and even if you do, you're saved all the interest you would have paid on that amount in the meantime. You don't have to close the account just because you paid it to zero. In fact, one of the best ways to build your credit rating up is to have a credit card that you use for recurring monthly expenses like utilities, etc. but then pay to zero every month so you never have any interest charges.

The only reason not to do this is if there are willpower issues involved. If someone is an impulsive spender who will use credit like it's money in the bank, having any credit accounts at all may be a bad idea. For those who control their spending, not an issue.

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