Pay it off or hold the cash?

I bought something rather expensive (3.5k) and foolish right before this downturn happened.  I put it on a CC because I wanted points and have the cash. I have until May 8th to pay it without interest.  It wouldn’t leave me with enough to feel good about cash now that everything is going nuts.  Still employed but likely will have a pay cut soon.   Husband in similar situation.  Interest is like 22%, which really sucks.  Usually don’t care because I pay off my credit cards.  Would you keep the cash and pay it out (with interest) or pay it off and pray?

Can’t take it back :( - already thought of that.   It is killing me I can’t pay it now... I usually pay CC weekly (since YNAB).
 

Thanks!

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  • Could try to sell it...

    I would not pay interest. If things get weird, I would simply incur debt when/if that happens.

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  • From my perspective, I'd say keep the cash and pay the minimums until you're back to a place where you're comfortable enough with your financial situation to say, "Ok, Now, I can pay the rest of it off."  Especially if you know that hard times are coming, to my mind, it's better to have cash on hand than to put yourself in a more precarious position, where it's likely that you'll just have to go back into debt.

    I have a similar situation, (almost reverse, actually, but still the same logic applies...  I got a smallish bit of a windfall and needed to decide if I should pay off a debt, or accumulate some more savings.) My wife and I had a discussion, and decided that it's better to have the money on hand, and use cash reserves when needed, than to pay off the debt, and then have no other option but to go back into debt if something goes south. It "hurts" more to have paid something off, and then have to go right back into debt, when you "could have" had the cash to deal with it.

    Just a different perspective.  I guess it is up to you ultimately how you deal with your money, that's why it's called "personal finance."  It's personal.

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  • If you pay it off evenly over a year that's about $400 in extra interest. Shorter will be less, longer will be more.

    I cannot tell if the purchase was budgeted or not. If so, pay it off. You can always find ways to put debt on the card in the future, and in the meantime you will pay interest.

    If it wasn't budgeted for, either WAM so you can pay it off, or if you can't WAM, what was the point of the question?

    Like 1
  • Lavender Piano said:
    I usually pay CC weekly

    I would stop doing this for sure, as this eliminates the possibility of riding the CC float. That is effectively an interest-free loan for however much you can consistently make in budgeted purchases each month.

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  • I would pay it but not until it is due. 

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  • What about finding a 0% interest introductory offer for a new credit card. There might be a balance transfer fee but at least it would likely be less than the cumulative 22% interest on your current card.

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  • Lavender Piano said:
    Still employed but likely will have a pay cut soon.   Husband in similar situation.

    This purchase is a one-time issue, with an impact between $0 and$400. Not a big deal in the grand scheme of things.

    I think the more pressing consideration is to evaluate what your budget will look like on the reduced monthly income. I suggest you make a new budget and figure out budget entries whose total fits within that income constraint. No need to enter any accounts, etc. It's simply a scratch-pad to which you can refer when needed.

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  • Can you move it onto a 0% interest card for awhile until the situation resolves?  Because I would keep the cash if I were you, but that is a crazy interest rate to pay just to have some cash.  However, if you pay it off any rely on debt for emergencies, you may want to be aware that during the last financial crisis people who were relying on debt for their emergencies sometimes were disappointed to find their credit lines decreased or cancelled by the lenders.  Cash is king.  If you can still get another, lower interest loan, then just move it to that, bc you don't know if you will be able to get one later, with the situation still so up in the air.

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  • I would hold the cash. It is more important during this time to have more capital with liquidity. Put the cash in a savings account and if in a month or two things go back to normal, pay off the debt. In the meantime, pay the minimum plus interest.

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  • To me, it would come down to - do I want this 'necessary'debt while I have an income or have 'necessary'debt while I have no income?

    It's a bit like Dave Ramsey says - A credit card will only make things worse if you do use it as a way of an Ëmergency fund".

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