Author Topic: Pay off 0% debt or not?  (Read 1921 times)

island_guy

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Pay off 0% debt or not?
« on: April 07, 2015, 12:16:10 AM »
Hello

I was wondering whether anybody has any advice on whether I should pay off a 0% debt or not?

Basically, I discovered MMM about a year ago and have completely transformed my financial life.  In this time, I've paid off all of my debts but one.

The one I've yet to pay off is 12,500 on a 0% interest credit card.  However, I also have about 50,000 cash in the bank (due to a windfall on starting a new job).

The debt on the credit card will be 0% interest for the next 24 months (until May 2017), it was a '0% for 36 months' deal and balance transferring all of my other credit card debt to this one was one of the first things I did as part of my re-financing.  It was originally 33,000 but I've paid it down to this level.

Now, I've got access to a 3% savings account and so I'm torn.  Psycologically I want to pay this off, I hate having debt and finally being able to say I'm debt free will no doubt feel great.

Conversely, I cannot shrug the knowledge that by putting the 12500 in the 3% savings account I can earn circa 770 in interest over the next 24 months and then pay off the debt in a single payment, but with an addtional 770 in my hand.

What do you think - is it better to clean the slate and start from a debt free position or would I be stupid to give up 770 of free money?


Joshua.Snider

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Re: Pay off 0% debt or not?
« Reply #1 on: April 07, 2015, 12:29:03 AM »
I would definitely keep the 0% for as long as you can.

Cathy

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Re: Pay off 0% debt or not?
« Reply #2 on: April 07, 2015, 12:35:37 AM »
Psycologically I want to pay this off, I hate having debt and finally being able to say I'm debt free will no doubt feel great.

Being debt-free will feel exactly as great as burning $772 in cash. Imagine the $772 of bills. Imagine lighting them on fire. Imagine watching them burn. Feels great, doesn't it?

It's unfathomable to me how so many people on this forum say it "feels great" or provides psychological pleasure to throw away money. You don't get rich by lighting money on fire, and if your psychological instincts tell that you should light money on fire, you should think about changing your outlook before it causes you to make more poor decisions.
« Last Edit: April 07, 2015, 12:37:53 AM by Cathy »

island_guy

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Re: Pay off 0% debt or not?
« Reply #3 on: April 07, 2015, 04:08:18 AM »
Psycologically I want to pay this off, I hate having debt and finally being able to say I'm debt free will no doubt feel great.

Being debt-free will feel exactly as great as burning $772 in cash. Imagine the $772 of bills. Imagine lighting them on fire. Imagine watching them burn. Feels great, doesn't it?

It's unfathomable to me how so many people on this forum say it "feels great" or provides psychological pleasure to throw away money. You don't get rich by lighting money on fire, and if your psychological instincts tell that you should light money on fire, you should think about changing your outlook before it causes you to make more poor decisions.

Thank you Cathy - when you say it like this the correct choice hits you like a train - 3% interest here I come :)