Should You Pay Off Your Credit Card or Save?

If you use credit cards regularly, you may have experienced that feeling of dread when you see the amount owed on it steadily rising, followed by an interest charge that only gets higher. In an ideal world, we wouldn't be spending more than we can pay off each month, but sometimes that's just not doable, and debt starts racking up.

There are many ways to go about paying off a credit card, but should you be saving up money first, then working on ridding yourself of debt? Reddit and Quora users weigh in on what has worked for them, and you may be surprised at their answers.

  1. Pay debts down in order of interest rate, worry about saving later. "Always pay off the highest interest rate debt first, in that order, while paying the monthly minimums on the rest. Then repeat as you wipe out each debt. Besides saving for an emergency fund and contributing to your 401k to meet the company match, there is no point in saving or investing in anything else since the high interest rates of the credit cards and student loans eat up any gains you could get otherwise." — adle1984
  2. Save a little bit, but pay off your card ASAP. "Save a small amount of money, $500-$1,000, so you have some breathing room. Then pay off those credit cards because any debt you have costs you way more in interest than you will ever get in a savings account. Anything with a return with even half the cost of interest on a credit cards comes with risk." — Craig Shclieve
  3. Pay off cards unless savings pay a higher rate than your interest is costing. If your savings pay a higher rate than what you pay in interest on the debts, then save . . . otherwise pay off." — Dax Balladares
  4. Have an emergency fund while paying card costs. "You want to continue to pay minimum payments on the credit cards and put enough away for a few months worth of bills in case an emergency happens. Then focus on credit cards . . . With credit cards being paid off, you can use the money that was going towards those payments to save. — Dominique Wilson
  5. Sell something that will help you save money, then use the cash you're saving to pay off your credit card. Reddit user pkeane04 suggested selling something that you spend money on regularly — like a car, cable TV, expensive phone bill — and use the money you save from that to pay off the card. That being said, he still advised those in credit card debt to start by paying it off before starting to think about saving.
  6. Pay high interest debt, then save, then invest. "Once the high interest debt is paid off, then worry about building a cash buffer and investing. Point the stream at a savings account until you have enough to go a few months without work. Bad things happen and you need cash on hand to fix them . . . Once you've put out the credit card fires and filled up your savings account, then you can figure out what types of investments make sense to point your cash stream at next." — Eric Scott 13

The main takeaway: pay off debt first, start saving after. The amount of money you will be saving while still paying off cards will be essentially canceled out by the amount you are accruing in interest fees.