Pay off credit card now or wait until I open up money market account? (rate, charge)

[WestPhillyDude75]

I have two goals this year

1. Pay off American Express which is $780 and open up money Market account with $5000.


Right now I'm halfway toward my $5000 goal but was wondering should I pay off the $780 and continue to move toward $5000?


OR

Continue to save and pay $30-35 a month to AMEX and once I get to $5000 pay off the credit card then?

[CaliTerp07]

My guess is that the Amex rate is a lot more than the piddly interest in a money market account. Pay off your debt immediately, or that $780 will multiply.

[WestPhillyDude75]

Originally Posted by CaliTerp07

My guess is that the Amex rate is a lot more than the piddly interest in a money market account. Pay off your debt immediately, or that $780 will multiply.

My credit limit is $800 so it's been going up and down the last 7 months between $700 and $800.

[CaliTerp07]

Originally Posted by TVandSportsGuy

My credit limit is $800 so it's been going up and down the last 7 months between $700 and $800.

But what is the rate on your amex? What kind of APR are you paying? A MM account will get you a few %age points interest, while a credit card will have double digit interest rates.

$700 earning 1.5% interest in a money market account is a lot less than $700 costing 15% in interest. Meaning that every month you have a dollar put into an MMA instead of paying off your debt, you are LOSING money.

[WestPhillyDude75]

Originally Posted by CaliTerp07

But what is the rate on your amex? What kind of APR are you paying? A MM account will get you a few %age points interest, while a credit card will have double digit interest rates.
$700 earning 1.5% interest in a money market account is a lot less than $700 costing 15% in interest. Meaning that every month you have a dollar put into an MMA instead of paying off your debt, you are LOSING money.

I'm kind of leaning toward erasing the $780 balance but i just want to reach that $5000. I couldn't reach it last year because I was unemployed.

[Sunnydee]

From a financial standpoint this is a no brainer, definitely pay off the credit card first. Get yourself debt free and then let the serious saving begin.

[CaliTerp07]

Understandable, but in the long run you'll have more money if you can pay off the credit card sooner. I would pay off the balance in full if you have the extra money (which it sounds like you do), and then you'll have nothing holding you back from the $5k mark.

[WestPhillyDude75]

Originally Posted by CaliTerp07

Understandable, but in the long run you'll have more money if you can pay off the credit card sooner. I would pay off the balance in full if you have the extra money (which it sounds like you do), and then you'll have nothing holding you back from the $5k mark.

Once I pay it off I plan to set a new limit at $100. No reason for me to ever be $700 in debt again as long as i have a permament job and a savings account,

[CaliTerp07]

A high limit is a good thing, so long as you pay off the balance in full each month. Having an $800 limit doesn't mean you have to USE it. My limit is something ridiculous like $20k--but I've never charged anywhere NEAR that much.

On the other hand, if you know yourself well enough to know you don't have the will power to refrain from purchasing things on a card that you don't have the cash in the bank to cover, then it would be responsible to get rid of it.

[michgc]

Why do you need $5000 to open up a money market account? If that is a minimum, why not find a credit union (or bank) that has a lower limit so you can pay off your credit card and also open your money market account. Our credit union has much lower amounts to open a money market account.