‘Sucks because I really want to save up this money’: I have 10K in CC debt and 19K in student loans. Should I focus on paying off student loans first or attacking credit card debt at 0% APR?

Hi Money Minder,

Hey there! I’ve got around 10K in credit card debt and 19K in student loans. But here’s the good part – I’m living abroad with free housing and super low living costs, allowing me to save at least 3K a month.

So, my dilemma is whether to tackle my student loan debt first (6.5% interest, grace period ending in November) or focus on paying off my credit cards. The catch with the credit cards is that they’re all at 0% APR for the foreseeable future, with the APR only kicking in around 2025.

My gut is telling me to go after the student loan debt first, especially since I’m still in the grace period. It sucks because I really want to bulk up my savings, but I know I need to get rid of this debt too.

What do you think I should do? Any advice would be greatly appreciated!

Cheers,

Response from THE MONEY MINDER:

Hello There,

Congratulations on being in a great situation abroad where your housing is covered and you can live inexpensively! It’s a fantastic opportunity to tackle your debt and improve your financial well-being. Given your circumstances, it’s definitely a good idea to make the most of your ability to save at least $3,000 per month.

In terms of whether to focus on your student loan debt or credit card debt first, my recommendation would be to prioritize the credit card debt. Although your credit card balances are currently at 0% APR, it’s essential to tackle them before the interest rates kick in. Paying off the credit card debt will help you avoid hefty interest charges in the future. Since you have until 2025 before the APR hits, it’s a good idea to start chipping away at that debt now.

Once you’ve cleared your credit card debt, you can shift your focus to paying off your student loans. Since you’re in a grace period and they have a 6.5% interest rate, addressing this debt sooner rather than later is a wise move. By targeting your debts strategically, you’ll set yourself up for financial success in the long run.

I understand the temptation to save up the money, but reducing your debt burden will ultimately put you in a stronger financial position. Think of it as an investment in your future financial stability. It may require some sacrifice now, but it will pay off in the long term.

Remember, it’s all about finding the right balance between saving and paying off debt. By creating a detailed plan and sticking to it, you’ll be on your way to achieving your financial goals. Stay disciplined and focused, and you’ll make significant progress towards becoming debt-free.

Keep up the good work, and feel free to reach out if you need any more advice or guidance. Best of luck on your journey to financial wellness!

Farewell from THE MONEY MINDER.