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Should I use my emergency savings to pay off credit card debt?
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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.
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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.
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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.
Despite losing his boxing match to Jake Paul, Mike Tyson in a social media post Saturday said he had “no regrets” to getting “in ring one last time.”
The boxing legend was defeated by social media star Jake Paul in a highly anticipated fight on Friday night with an age difference of over three decades between the two contenders.
Netflix said Saturday that 60 million households worldwide tuned in to watch the match. The two fighters went eight full rounds, with each round two minutes long. Paul defeated Tyson by unanimous decision and the 27-year-old upset boxer and 58-year-old former heavyweight champion hugged afterward.
Paul was expected to earn about $40 million from the fight, and Tyson was expected to take around $20 million for the fight, according to DraftKings and other online reports.
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Tyson said on his social media that “this is one of those situations when you lost but still won. I’m grateful for last night.”
The fight almost didn’t happen after Tyson experienced an ulcer flare-up while on a plane in March. He addressed his illness Saturday, writing that he “almost died in June.” He said he had eight blood transfusions and “lost half my blood and 25lbs in hospital and had to fight to get healthy to fight so I won.”
Tyson retired from boxing in 2005 after a 20-year career. He last fought in a 2020 exhibition match against former four-division world champ Roy Jones Jr.
“To have my children see me stand toe to toe and finish 8 rounds with a talented fighter half my age in front of a packed Dallas Cowboy stadium is an experience that no man has the right to ask for. Thank you,” he said.
Alex Sundby and
contributed to this report.
In their final meeting, China’s leader Xi Jinping told U.S. President Biden that his nation was “ready to work with a new administration,” as President-elect Donald Trump prepares to take over.
The two leaders gathered Saturday on the sidelines of the annual Asia-Pacific Economic Cooperation summit. Mr. Biden was expected to urge Xi to dissuade North Korea from further deepening its support for Russia’s war on Ukraine. It marked their first in-person meeting since they met in Northern California last November.
Without mentioning Trump’s name, Xi appeared to signal his concern that the incoming president’s protectionist rhetoric on the campaign trail could send the U.S.-China relationship into another valley.
“China is ready to work with a new U.S. administration to maintain communication, expand cooperation and manage differences so as to strive for a steady transition of the China-U.S. relationship for the benefit of the two peoples,” Xi said through an interpreter.
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Mr. Biden, meanwhile, spoke in broader brushstrokes about where the relationship has gone and reflected not just on the past four years, but on their long relationship.
“Over the past four years, China-U.S. relations have experienced ups and downs, but with the two of us at the helm, we have also engaged in fruitful dialogues and cooperation, and generally achieved stability,” he said.
Mr. Biden and Xi, with top aides surrounding them, gathered around a long rectangle of tables in an expansive conference room at Lima’s Defines Hotel and Conference Center.
There’s much uncertainty about what lies ahead in the U.S.-China relationship under Trump, who campaigned promising to levy 60% tariffs on Chinese imports.
Bobby Djavaheri, president of Los Angeles-based Yedi Houseware Appliances — which manufactures its products in China — told CBS News in an interview this week that such tariffs “would decimate our business, but not only our business. It would decimate all small businesses that rely on importing.”
Trump has also proposed revoking China’s Most Favored Nation trade status, phasing out all imports of essential goods from China and banning China from buying U.S. farmland.
Already, many American companies, including Nike and eyewear retailer Warby Parker, have been diversifying their sourcing away from China. Shoe brand Steve Madden says it plans to cut imports from China by as much as 45% next year.
White House national security adviser Jake Sullivan said Biden administration officials will advise the Trump team that managing the intense competition with Beijing will likely be the most significant foreign policy challenge they will face.
It’s a big moment for Mr. Biden as he wraps up more than 50 years in politics. He saw his relationship with Xi as among the most consequential on the international stage and put much effort into cultivating that relationship.
Mr. Biden and Xi first got to know each other on travels across the U.S. and China when both were vice presidents, interactions that both have said left a lasting impression.
“For over a decade, you and I have spent many hours together, both here and in China and in between. And I think we’ve spent a long time dealing with these issues,” Mr. Biden said Saturday.
But the last four years have presented a steady stream of difficult moments.
The FBI this week offered new details of a federal investigation into Chinese government efforts to hack into U.S. telecommunications networks. The initial findings have revealed a “broad and significant” cyberespionage campaign aimed at stealing information from Americans who work in government and politics.
U.S. intelligence officials also have assessed China has surged sales to Russia of machine tools, microelectronics and other technology that Moscow is using to produce missiles, tanks, aircraft and other weaponry for use in its war against Ukraine.
And tensions flared last year after Mr. Biden ordered the shooting down of a Chinese spy balloon that traversed the United States.
President-elect Donald Trump has selected Chris Wright, a campaign donor and fossil fuel executive, to serve as energy secretary in his upcoming, second administration.
CEO of Denver-based Liberty Energy, Wright is a vocal advocate of oil and gas development, including fracking, a key pillar of Trump’s quest to achieve U.S. “energy dominance” in the global market.
Trump also said in a statement Saturday that Wright will serve on the newly-created National Energy Council, which will be chaired by North Dakota Gov. Doug Burgum, Trump’s selection for secretary of the Interior.
Burgum will oversee a panel that crosses all executive branch agencies involved in energy permitting, production, generation, distribution, regulation and transportation, Trump said in a previous statement.
Wright has been one of the industry’s loudest voices against efforts to fight climate change and could give fossil fuels a boost, including quick action to end a year-long pause on natural gas export approvals by the Biden administration.
Wright also has criticized what he calls a “top-down” approach to climate by liberal and left-wing groups and said the climate movement around the world is “collapsing under its own weight.”
Consideration of Wright to head the administration’s energy department won support from influential conservatives, including oil and gas tycoon Harold Hamm.
Hamm, executive chairman of Oklahoma-based Continental Resources, a major shale oil company, is a longtime Trump supporter and adviser who played a key role on energy issues in Trump’s first term.
Hamm helped organize an event at Trump’s Mar-a-Lago resort in April where Trump reportedly asked industry leaders and lobbyists to donate $1 billion to Trump’s campaign, with the expectation that Trump would curtail environmental regulations if re-elected.
The Energy Department is responsible for advancing energy, environmental and nuclear security of the United States. The agency is in charge of maintaining the country’s nuclear weapons, oversees 17 national research laboratories and approves natural gas exports, as well as ensuring environmental cleanup of the nation’s nuclear weapons complex. It also promotes scientific and technological research.
Republican Sen. John Barrasso, who is expected to become chairman of the Senate Energy and Natural Resources Committee, said Trump promised bold choices for his Cabinet, and Wright’s nomination delivers.
“He’s s an energy innovator who laid the foundation for America’s fracking boom. After four years of America last energy policy, our country is desperate for a secretary (of energy) who understands how important American energy is to our economy and our national security,″ Barrasso said of Wright, adding: “Wright will help ensure America remains committed to an all-of-the-above energy policy that puts American families first.”
Thomas Pyle, president of the American Energy Alliance, a conservative group that supports fossil fuels, said Wright would be “an excellent choice” for Energy secretary. Pyle led Trump’s Energy Department’s transition team in 2016.
Liberty is a major energy industry service provider, with a focus on technology. Wright, who grew up in Colorado, earned undergraduate degree at MIT and did graduate work in electrical engineering at the University of California-Berkeley and MIT. In 1992, he founded Pinnacle Technologies, which helped launch commercial shale gas production through hydraulic fracturing, or fracking.
He later served as chairman of Stroud Energy, an early shale gas producer, before founding Liberty Resources in 2010.
