edit, okay! Just paying it all off and moving on to being more responsible, thanks for the help folks!
Hello everyone!
To keep this as brief as possible, I racked up around 17k worth of credit card debt over the last decade. It’s destroyed my credit because I’ve only ever been able to make minimum payments.
This past year, my grandfather passed away, he was extremely well off, generational wealth. When he died he left a large sum of money to be divided between the grandchildren and children. Once all was said and done, I inherited just over 100,000 dollars. Literally life changing money for me right now.
My question is, will paying this debt off at once be better than making large payments monthly? (Like 5k a month) I’m going to invest the remainder of it and just let it grow. Keeping the credit cards for small subscriptions so I can manage them properly this time around, And lock them away and forget about them.
I’d appreciate any advice people have.
Inherited money, want to pay off debt.
byu/Spirited_Sock9402 inpersonalfinance
Posted by Spirited_Sock9402
21 Comments
Just pay it off and learn the lesson.
> My question is, will paying this debt off at once be better than making large payments monthly
Of course
Look what paying it monthly has done for you so far
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
Pay it all immediately, assuming it’s at credit card interest rates, and never carry a balance on your card again, far more urgent than trying to get 8-10% in the market is not carrying anything at 16-24% interest.
Your option is pay off all the Debt now vs pay 29% interest on the outstanding balance….how is this even a question?
There is no benefit to paying 5k a month. Pay off all the debt.
>It’s destroyed my credit because I’ve only ever been able to make minimum payments.
If you’ve never had a late payment then your credit is far from “destroyed”. The effects of utilization are temporary. It’s just that your temporary is on more of a geologic timeline than a monthly one.
>My question is, will paying this debt off at once be better than making large payments monthly?
Even if your credit *was* destroyed, stretching out the payments does nothing to help and only costs you more money.
>And lock them away and forget about them.
How to you plan to pay for things day to day? The risks of using a debit card can be an onerous alternative to learning to be responsible with credit.
The only reason you wouldn’t pay a debt off is if the interest rate is lower than the rate at which your money is growing — a HYSA isn’t going much above 5% and uhm… your interest on your credit card is gonna be higher
Example – if you had student loans with a 2% interest rate and can find a HYSA with 4%; that would be a scenario where you just make your monthly payments
Pay it and then I’d say you may want to learn how to invest/budget so you don’t blow it all on your credit cards in the future…
Making all of your minimum payments didn’t destroy your credit. What else has happened?
There is no benefit to putting off paying your CC debts. It will only cost you more money to delay. Pay it all off ASAP. Say a thank you to your grandfather when you press the button.
Contribute $7k to a Roth IRA.
Open a HYSA and put 6 months of expenses in it. Forget it exists. Don’t touch it until/unless you have a true financial emergency.
Invest the rest in a taxable account.
You’re paying between $3,000 and $5,000 a year in interest *alone*.
Pay the debt off as soon as you can to avoid the interest.
Beyond that…
Do you have an emergency fund?
How much were you paying monthly on the credit card debt?
Do you have any other debt? Car loan, student loan, mortgage? If so, what is the interest rate?
Do you have retirement accounts set up?
Are you looking to buy a house in the next five years?
There is no benefit to letting CC sit. If you make a pros and cons list, there are no pros. Pay it.
Pay it off, enjoy a fraction, make a max contribution to a 401k, I use empower, do a 6 month emergency fund of living expenses and the rest is free game bb. Congratulations, also TELL NO ONE.
Just wanna say you getting 100k means it isn’t generational wealth.
Generational wealth and 100k are very different things. Pay off your debt. That money doesn’t go far so save the rest
Pay it all off at once. Interest on credit cards eats away at your money fast and there’s no benefit to dragging it out. Clear the balance completely then focus on investing what’s left. Using your cards only for small controlled purchases and paying in full each month is the right move to rebuild your credit.
Pay off the debt all at once and invest the rest.
Pay off the debt, set up an emergency fund, and then open a brokerage account at Vanguard so you can invest the rest in a Vanguard index fund. Once you’ve done that cut up your credit cards and throw them away. This is only life changing money if you actually use it to change your life. If you fall back into the same habits you’re doing right now, you’ll quickly learn a hard lesson that $100K of cash isn’t really that much wealth at all.
Don’t close the cards. Don’t use them anymore.
Bravo on paying off the debt lump sum, now go and sin no more.
I doubt gains would outperform the interest, but to answer this question you need the exact interest that you will be subject to. Paying down the debt will also recover your credit rating.
Pay it off in full use the card only for those subscriptions and lock it in a safe otherwise, you clearly cannot handle it.
Pay off the 17k debt instantly, have 6 months of emergency funds in whatever investment vessel you prefer. Max out your Roth IRA yearly and focus on living a great life. Don’t change your spending habits and watch how much happier you’re going to be. Congrats on the inheritance, now make your grandpa proud.