A report from U.S. News & World Report shows getting out of debt isn't always the most imporant thing these days.
Personal finance gurus, including myself, usually treat credit card debt as the plague and urge consumers to pay it off-ASAP. But this week, Queen of Personal Finance Suze Orman announced on The Oprah Winfrey Show that the old advice is wrong. The recession has made job loss so prevalent, she says, that consumers now need to make creating an emergency fund with eight months worth of expenses their top priority.
"If you have an unpaid credit card balances and not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can," Orman said on the program.
Telling her fans not to prioritize paying off credit card debt is quite a shocker since her focus has long been about getting out of debt. In her latest book, 2009 Action Plan: Keeping Your Money Safe & Sound, she dedicates an entire chapter on the subject. But Orman says now, with the number of unemployed Americans rising, having an emergency savings fund is even more important than being debt-free. "The sad reality is that the credit card industry is taking actions to protect themselves with no regard to your needs or how good you have been in paying your bills on time," she said, referring to the fact credit card companies have been lowering credit limits, increasing interest rates, and revoking credit credit cards altogether.
Once you have built your emergency fund you can start working on paying down your credit card debt again. Here are the main points you should be paying attention to:
Pay attention to credit limits- Be careful of over the limit fees. They can run you $30 or more.
Pay off the highest interest rate card first- BankRate.com has calculators that can tell you how long it will take to pay off your credit cards.
Ask for a Lower interest rate- Be sure there are no red flags on your credit or your interest rate could get worse.
Personal finance gurus, including myself, usually treat credit card debt as the plague and urge consumers to pay it off-ASAP. But this week, Queen of Personal Finance Suze Orman announced on The Oprah Winfrey Show that the old advice is wrong. The recession has made job loss so prevalent, she says, that consumers now need to make creating an emergency fund with eight months worth of expenses their top priority.
"If you have an unpaid credit card balances and not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can," Orman said on the program.
Telling her fans not to prioritize paying off credit card debt is quite a shocker since her focus has long been about getting out of debt. In her latest book, 2009 Action Plan: Keeping Your Money Safe & Sound, she dedicates an entire chapter on the subject. But Orman says now, with the number of unemployed Americans rising, having an emergency savings fund is even more important than being debt-free. "The sad reality is that the credit card industry is taking actions to protect themselves with no regard to your needs or how good you have been in paying your bills on time," she said, referring to the fact credit card companies have been lowering credit limits, increasing interest rates, and revoking credit credit cards altogether.
Once you have built your emergency fund you can start working on paying down your credit card debt again. Here are the main points you should be paying attention to:
Pay attention to credit limits- Be careful of over the limit fees. They can run you $30 or more.
Pay off the highest interest rate card first- BankRate.com has calculators that can tell you how long it will take to pay off your credit cards.
Ask for a Lower interest rate- Be sure there are no red flags on your credit or your interest rate could get worse.
No comments:
Post a Comment