Ask the Piggy Bank: Credit Card v. CD
January 2, 2009 by Miranda Marquit
Filed under Consumer warning, Credit, Debt Management, Money advice, Personal Finance, ask-the-Piggy-Bank
It’s the first reader question of the New Year:
I have a credit card with a $6700.00 balance,with an interest rate of 14%, have a CD which I can cash in to pay this down, CD will yield about $5600.00. Should I use the CD to pay down the credit card? CD is paying about 3.6%
Personally, I am inclined to take the money in the CD and pay down the credit card. The 14% interest that you pay on the credit card more than cancels out the 3.6% you are getting on the CD. Indeed, you will be paying a great deal more in interest than you could earn on the CD. Savings rates are dropping rapidly in a variety of categories, including high yield savings accounts and CDs. It’s what happens as the Fed rate heads lower. In this climate, it might be best to pay down debt while you can, doing your best to free yourself from obligations. Get the credit card paid off, and then start rebuilding your savings.
My only concern is whether or not the CD has reached full maturity. You may have to pay a penalty for cashing the CD in early if the entire term of the CD has not run its course. Do a cost-benefit analysis. Even with the penalty, you may still be saving more by getting rid of the interest payments on the credit card.
Readers: Do you agree with my assessment? Would you pay off the credit card or keep the CD?
My Credit Card Company Wants to Give Me a Home Loan Refinance
April 12, 2008 by Miranda Marquit
Filed under Credit, Family finances, Interest rates, Mortgage and Loans, Personal Finance
Yesterday I got an interesting offer in the mail. My credit card company wants to give me a home loan refinance!
Because you have shown financial responsibility, we are sending you this special offer. Refinance to a low rate of 6.28%!
The offer goes on, of course, to expound on the things I could do. Save money on interest! Take some cash out to go on vacation! Take cash out to improve my home! Take some cash out to pay off my credit cards!
Unfortunately for my credit card company, I pay off my credit card balances. I have a special fund that the family puts money in for vacation, and we’ve already saved up almost enough to have our yard put in. And the current (fixed) interest rate on our home mortgage loan is below 6%.
So, what do I need this home loan refinance for? Right. I don’t. Because, for the most part, I try to show financial responsibility.
