MONEY CLINIC | Would it be wise to pay my credit card debt with my savings?

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Credit providers may not penalise you when you pay more each month in order to pay off the debt faster.
Credit providers may not penalise you when you pay more each month in order to pay off the debt faster.
Peter Muller

A Fin24 reader owing close to R90 000 on her credit card and has saved enough money to settle the bill, wants to know if it would be wise to do so given the high interest charged.

She writes: 

I just want to ask if it is wise to pay my credit card using my savings money.

My credit card debt is close to R90 000 and the interests are just too high. I've saved enough money to pay the whole balance and start saving again. My concern is that I am going to end up paying more than R100 000 due to interest. 

Renee Marais, registered and independent debt counsellor with the NCR responds:

It is always wise to pay off any large credit agreement or facility first as quickly as possible. You are allowed to do that in terms of the law at any time. 

Credit providers may not penalise you when you pay more each month in order to pay off the debt faster. If you have enough money to pay the debt in full, please obtain an early settlement value from your credit provider.  

In many cases, it will affect the interest that would have formed part of the long-term interest and will result in a reduction of the total to be paid. The interest you earn on the savings account is far lower than the interest you pay towards the credit card. In my view, the final settlement of the credit card might be to your advantage.  

*Questions may be edited for brevity and clarity.

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