CBS News
Should I use my emergency savings to pay off credit card debt?
Getty Images
Throughout your adult life, you’ve likely been reminded of the importance of saving money. As a result, you’ve worked hard to build up a sizable emergency fund, one you can fall back on when times get tough.
On the other hand, you may have compiled quite a bit of credit card debt, too. After all, the vast majority of adult Americans have at least one credit card in their wallets. As you make your credit card payments each month, watching interest take its toll, you may start to wonder if it’s more important to have a meaningful emergency fund or if it’s more important to pay off your debts. Below, we’ll discuss some considerations to account for when making this determination.
Learn about your debt relief options now.
Should I use my emergency savings to pay off credit card debt?
“If you’re considering whether or not to use your emergency fund to pay off credit card debt, you need to apply a solid analysis to the amount of money you have in your emergency fund and how much credit card debt you have,” explains Krisstin Petersmarck, investment advisor representative at Bridgeriver Advisors in Bloomfield Hills, Michigan.
“You do not want to completely deplete your emergency fund,” Petersmarck says. It is important to maintain at least three months of expenses in your savings account, she says.
For example, say you have about $3,500 in monthly expenses. In this case, you should have at least $10,500 in your savings account at all times. So, if you have $20,000 in your savings account, using $9,500 of it to pay off your high interest credit card debt may be a wise decision.
Find out how fast you can get out of debt today.
Effective ways to pay off credit card debt faster
Even if you don’t have excess funds in your savings account, you’re not doomed to be in credit card debt forever. There are several things you can do to pay your debt off faster. Some of the most effective ways to eliminate credit card debt are listed below.
Debt relief services
Before getting too worried, research all your potential options. A debt relief service may help.
These services typically negotiate with your lenders on your behalf to reduce your interest, balance, or both. They also set up payment plans that are designed to be effective and affordable. Consider reaching out to debt relief experts to speed up your credit card debt payoff process.
Debt consolidation loans
Take steps to “consolidate your debts – meaning you can combine multiple high interest balances into one with a lower rate,” says Shachar Bialick, CEO and founder of Curve, a company that simplifies credit card rewards management. “This way, you can pay off your debt faster without increasing payment amounts, and you’re not tracking multiple balances across several accounts.”
So, if you’re a well-qualified borrower, it may be advantageous for you to use a new loan to pay off your current credit card debt. There are a couple of popular ways to do so:
- A personal debt consolidation loan: These loans typically come with lower interest rates than credit cards and a fixed payment plan. As such, when you take advantage of them, you’ll likely save money on interest and pay your debts off faster.
- A home equity loan: Home equity loans typically come with competitive interest rates because they’re backed by your home. Using these loans to consolidate your debts could lead to significant savings on interest and a lower overall minimum payment.
- Balance transfer credit cards: Balance transfer credit cards typically come with a zero or low promotional interest rate for a short period of time. You could use these accounts to make a dent in your balance during the promotional period. But if you do, make sure you have a plan for when the promotional interest rate expires as any remaining debt will typically be charged a high standard credit card interest rate.
Debt avalanche or debt snowball payment plans
The debt avalanche and debt snowball payment plans have worked for a countless number of borrowers and may work well for you. Both payment plans start with you choosing a fixed monthly amount of money to pay to all of your creditors combined each month – even if that’s no more than your minimum monthly payments as they stand today. Once you decide what that payment will be, here’s how you follow these payment plans:
- Debt avalanche: Make minimum payments to all but your highest interest rate debt. Send all extra money to your highest interest rate credit card until it has a zero balance. Once you pay it off, focus all excess funds in your fixed payment to your next highest interest rate. Continue doing so until all of your credit card debt is paid off. Focusing on your highest interest debt can lead to significant long-run savings.
- Debt snowball: Focus your excess funds on your smallest debt. When you pay that debt off, move on to the next smallest and continue until all of your credit cards are paid off. The small wins in the beginning can motivate you to stay on the path to payoff for the long run.
The bottom line
It may or may not be wise to use your emergency fund to pay off your credit card debt. That depends on how much money you have set aside for emergencies and how much credit card debt you owe. Nonetheless, even if you don’t have any excess in your emergency fund, you don’t have to live with costly credit card debt forever. Take advantage of one of the options above to eliminate your credit card debt faster. Get started here now.
Watch CBS News
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
CBS News
Saturday is the winter solstice and 2024’s shortest day. Here’s what to know about the official start of winter.
The 2024 winter solstice, the shortest day of the year, happens on Saturday, Dec. 21, in the Northern Hemisphere. The celestial event signifies the first day of winter, astronomically.
What is the winter solstice?
The winter solstice is the day each year that has the shortest period of daylight between sunrise and sunset, and therefore the longest night. It happens when the sun is directly above the Tropic of Capricorn, a line of latitude that circles the globe south of the equator, the National Weather Service explains.
The farther north you are, the shorter the day will be, and in the Arctic Circle, the sun won’t rise at all.
How is the day of the winter solstice determined?
The winter solstice occurs because of the Earth’s tilt as it rotates around the sun.
When the Northern Hemisphere tilts away from the sun, the nights last longer. The longest night happens on the solstice because the hemisphere is in its furthest position from the sun. That occurs each year on Dec. 21 or 22.
This year, it falls on Dec. 21 at 4:21 a.m ET, to be precise.
On the summer solstice, when the northern tilt is closest to the sun, we have the longest day, usually June 20 or 21.
National Weather Service
The solstices are not always exactly on the 21st every year because the earth’s rotation around the sun is 365.25 days, instead of 365 even.
Will days start getting longer after the winter solstice?
Yes. Each day after the solstice, we get one minute more of sunlight. It doesn’t sound like much, but after just two months, or around 60 days, we’ll be seeing about an hour more of sunlight.
When will winter officially be over in 2025?
The meteorological winter ends on March 20, 2025. Then, spring will last until June 20, when the summer solstice arrives.
How is the winter solstice celebrated around the world?
Nations and cultures around the world have celebrated the solstice since ancient times with varying rituals and traditions. The influence of those solstice traditions can still be seen in our celebrations of holidays like Christmas and Hanukkah, Britannica notes.
The ancient Roman Saturnalia festival celebrated the end of the planting season and has close ties with modern-day Christmas. It honored Saturn, the god of harvest and farming. The multiple-day affair had lots of food, games and celebrations. Presents were given to children and the poor, and slaves were allowed to stop working.
Gatherings are held every year at Stonehenge, a monumental circle of massive stones in England that dates back about 5,000 years. The origins of Stonehenge are shrouded in mystery, but it was built to align with the sun on solstice days.
Andrew Matthews/PA Images via Getty Images
The Hopi, a Native American tribe in the northern Arizona area, celebrate the winter solstice with dancing, purification and sometimes gift-giving. A sacred ritual known as the Soyal Ceremony marks the annual milestone.
In Peru, people honor the return of the sun god on the winter solstice. The ancient tradition would be to hold sacrificial ceremonies, but today, people hold mock sacrifices to celebrate. Because Peru is in the Southern Hemisphere, their winter solstice happens in June, when the Northern Hemisphere is marking its summer solstice.
Scandinavia celebrates St. Lucia’s Day, a festival of lights.
The “arrival of winter,” or Dong Zhi, is a Chinese festival where family gathers to celebrate the year so far. Traditional foods include tang yuan, sweet rice balls with a black sesame filling. It’s believed to have its origins in post-harvest celebrations.
Researchers stationed in in Antarctica even have their own traditions, which may include an icy plunge into the polar waters. They celebrate “midwinter” with festive meals, movies and sometimes homemade gifts.
Watch CBS News
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
