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Question:


Is it better to put extra money on existing debt or save it for emergencies? Many articles suggest having an emergency fund. We (like many) have gotten ourselves into credit card debt when we were younger, and are trying hard to pay it off asap.
-Teri


Answer:


This sort of question comes up a lot. The better option probably is to pay off debt in the knowledge that the available credit on your cards will be expanding as you do so. If an emergency does arise, you can use your cards for necessary purchases, and because you will have been reducing your outstanding debt, there will be that much more available. Meanwhile, you will have been saving money on interest, allowing you to repay the debt even faster. That might also encourage card issuers to lower the interest rates they charge you, and it may give you access to more and cheaper credit from other sources.

-Conrad de Aenlle



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