Q. I have $9,000 saved up and I got a $3,500 credit card debt. I make payments on it constantly I've got 0% interest for the next 3 months. Should I use the savings to pay off the entire credit balance, or should I just continue making minimum payments until the balance is zero?

A. I wouldn't worry about the credit balance itself during those 3 months of grace period. After that period expires, you will have to pay interest on your credit card. Savings rates are always lower than credit rates, and this is why you will start losing money if you keep a positive balance. So, basically, the balance is OK during the entire grace period.

 

 

 

However, if your credit balance is just 20% or less below the limit, that can start hurting your credit score. No matter how much your savings are, using credit extensively tells lenders that the person relies too much on borrowed money. If your balance is close to the limit, you may want to pay it off now, or at least bring it down to 50% of the limit.

Good luck!

Moni.

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