Seeking Advice on Credit Card Debt Repayment Vs. Savings Strategy

• 

  boomramada on 07/06/2025 - 22:07

  +16

  If you are asking this question of us, you should pay it in full ASAP and cancel your card for your own good.

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  wannagrababargain on 08/06/2025 - 10:11

  If you are disciplined it is better to keep it in cash while the interest rate is 0%. Say you need to pay down $1000 a month to get it to zero by the end of the promotion, I would pay the minimum each month and stash the rest of that $1k in a high interest savings account. At the end of the promotional interest period pay off the total with that savings account.

  PS If these are introductory purchase rates then be very careful, it is tempting to load up on unnecessary debt. My scenario assumes you stop adding debt to them now, and seek to pay off the original $11k

  • 

    welcomeUniverseWorld on 08/06/2025 - 13:12

    Yeah. These are zero percent until Oct 2026.

    I am paying enough from my salary such that it pays off entirely by sept 2026. Also ensuring I live below my full salary.

    However it also means I have to wait until oct/nov 2026 before I open any mortgage

• 

  p1 ama on 08/06/2025 - 20:50

  Is it genuinely a 0% interest arrangement, or are you being charged fees which often work out to be an equivalent APR of like 10% p.a.?

  • 

    welcomeUniverseWorld on 09/06/2025 - 08:47

    0%

  • 

    welcomeUniverseWorld on 09/06/2025 - 10:42

    These are zero percent. When it was opened, there was a balance transfer fees (I think around 2% or something). However, it already is in the past. Currently, these are zero percent until Oct 2026. No other explicit fees except carrying a debt.

• 

  pegaxs on 09/06/2025 - 12:30

  +1

  The smart thing to do is to shred the cards and delete them from your phone for a start.

  If you have 0% interest, I would leave the $11k in the bank to earn interest. If you dump this $11k in to pay off the debt, you are missing out on at least 12~14 months it would have been earning interest.

  I would work out what would clear the outstanding amount by the end of the interest free period and use that as your monthly payment to have it squared away when interest is slated to start.

  And then, once this is all squared away, cancel the cards.

  • 

    welcomeUniverseWorld on 09/06/2025 - 13:02

    I am essentially following that approach. The only drawback is that I do not yet own a home. I would like to pursue a mortgage, but I believe I need to clear all existing debt first. This process has been somewhat prolonged.

    The positive side is that it has helped me consistently live below my means, which is a valuable discipline when preparing to purchase a home mostly for my whole family. From next Oct 2026, I should be able to purchase an apt/home that would be like paying my current rent + $1000 (I pay for credit card) + a little more.

    • 

      p1 ama on 09/06/2025 - 18:34

      +1

      The only drawback is that I do not yet own a home. I would like to pursue a mortgage, but I believe I need to clear all existing debt first. This process has been somewhat prolonged.

      Why would you need to clear all existing debt before pursuing a home loan?

      Depends on your income and how much you are looking to borrow. Punch some numbers into a borrowing calculator and you'll get a feel for what your options are.

      FWIW, I realised that you've posted previously about credit card debt (see: https://www.ozbargain.com.au/node/890595), not sure if this is the same debt or different debt, but I'd suggest reconsidering how you use credit cards. Ultimately, "zero interest" schemes are predatory - banks are not in the business of giving away things for free. Either they're fleecing you on the costs to set up the payment plans, or they're hoping you won't be able to pay it off before the interest-free period ends and be slapped with exorbitant interest rates, or that you'll get into the habit of racking up credit card debt.

      Obviously only you know you, but there may be value in just paying off the credit card debt and closing those accounts to leave that behind you. It's all well and good to set aside money that you intend to use to pay off that debt, but things happen, expenses come up, other challenges come up, you might lose your job or face some other financial hardship, and all of a sudden, that money needs to go towards something else and you're stuck with credit card debt at 22%+ interest rates.

      • 

        welcomeUniverseWorld on 09/06/2025 - 19:24

        I believe there is an assumption that I will not be able to repay the debt.

        I faced some financial difficulty in the recent past, and using balance transfers on credit cards helped me manage through that period. Since then, I have saved enough to contribute toward a mortgage deposit for a small apartment. However, I am not comfortable applying for a mortgage while any credit card accounts remain open. It is more of a personal thing—I want to clear all debt first, then pursue a mortgage, and ideally never use credit cards again.

        At this point, our household is primarily supported by my income, and I have been able to save consistently. My wife's salary is being set aside to help build the mortgage deposit.

        Given our circumstances and my recent medical surgeries, I have developed a strong habit of saving and prefer not to carry any credit card debt when we move forward with the mortgage.

        • 

          p1 ama on 09/06/2025 - 19:35

          +1

          @welcomeUniverseWorld: Then I think you have your answer - pay off the credit card debt today, given you have the money. The interest you would have earned would be minimal anyway (probably getting like 3-4% on around $10k for a year), and you'll have to pay tax on that as well.

          Just clear the credit card debt, close down the accounts, and leave that period of life behind you for good.