It Can Save You Money.
If you have debt, you are almost certainly paying regularly accrued interest on it. If you have money in savings, hopefully you are earning interest on it. However, depending on your interest rates, you are most likely paying more in interest to the credit card companies than you are earning on your savings.
Cashing Out Savings Can Be Dangerous.
While paying off your credit card debt with savings can be mentally and financially freeing, it can also get you into hot water if you have an emergency and are left with no savings. In fact, you might end up right back where you started--deep in debt, but this time with no savings to cushion the blow.
Bottom Line
Save $1,000 as your emergency fund, says nationally known financial author and radio and TV personality Dave Ramsey. "This beginning emergency fund will keep life's little Murphies from turning into new debt while you work off the old debt. If a real emergency happens, you can handle it with your emergency fund." Then use the rest of your savings to cut down on your debt.
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