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Pay off credit cards or contribute fully to 401k?
My wife and I recently graduate from college and we both abused credit cards earlier in our college years. We now both do not use them, but they are almost maxed out causing us each to pay hundreds of dollars every month on payments. Although we always pay a little bit more than the minimum, it is a becoming a burden to pay with the added expenses now out of college.
My wife just started a job at a bank and is contributing to her 401k. Her bank matches dollar for dollar for the first 3%, then only matches half(50 cents) for every dollar on the final 2%. She was advised to contribute the entire 5% to her 401k.
My question is, do you think it would be a good idea to focus more on paying down these high credit card payments? Maybe by using that last 2% that the employer does not match 100% and use that to pay credit cards down?
Any suggestions would be helpful. I wish we would have both understood more about credit cards when we were given all these credit cards with such high limits.
Asked by
jan86
1 year ago
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I would use the last 2% to pay down the high interest credit cards. Contact Greenpath Credit Counselors which are highly recommended so you can get on track from a budget, savings, retirement and to affectively get on a plan to eliminate the credit card balances. Good Luck.
nandog 1 year ago
yea, you need counciling and a budget gone over with you
nbirnbaum2 1 year ago
Yes, especially given your ages, you should wipe out that credit card debt first. Try the Dave Ramsey "debt snowball" to begin shoveling away at that burdensome debt. (http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/). And good for you for realizing you had a problem with your credit cards in time to do something productive about it.
Clairissa 6 months ago
I'd contribute the full 5%. I don't think there's any way your credit card interest rates can compare with the 50% your wife would gain on that last 2%. It would take some calculations, but you would need to figure out the dollar amount that her employer contributes to the 401K (about 1% of her income), and the dollar amount that you would save in interest if you applied that 2% of her income to the credit cards. I doubt the CC interest paid would be higher.
Dawnstream 4 months ago