Saving & Budgeting

Should I save money or pay off debt?

It’s a classic balancing act—paying off debt while saving money. Learn how to stay on top of both.

Build it up or pay it down

What should you do first – pay down debt? Build up an emergency savings fund?

Both are smart goals, but it’s hard to know where to start – and how much to put towards each. Instead of getting overwhelmed by it all and then doing nothing, take a few minutes to figure out the best plan for you.


Here’s how.

Set a simple budget

First, take a few minutes to set a simple budget so you know how much money you have to work with. ‘Needs’ are your mortgage or rent, and the things you absolutely must pay for each month like health insurance, car payments, home or renters and car insurance, and phone and utilities. Add money for food and basic essentials, then your required minimum credit card payments. The amount left over is how much extra you can pay towards savings or paying down debt.

Be realistic; once you decide how much you can pay each month, stick with it. And whatever you do, avoid adding more to your credit card balance. Pack your lunch, drive your car another year, cook at home instead of going out – do whatever it takes to stay on track.


Pad your savings first

It might be tempting to split your money down the middle and pay half towards debt and put the other into savings. But, if you have no savings at all, start by giving yourself a little cushion.

While many experts recommend that you have three to six months of living expenses set aside in an emergency savings fund, most of us don’t have that luxury. Start by saving to set aside one month’s rent or mortgage. Even $1,000 set aside for unexpected expenses will keep you from piling more debt onto your credit cards if something happens.

Set up an automatic savings plan, or get a jump start by putting your tax refund or year-end bonus into a savings account. Every little bit helps move you towards your goal.


Pay down the cards

Next, start paying off your credit cards and personal loans.

You have a choice – pay off debts with the highest interest rate first or pay down the smallest debt first and then move on to the next one. It’s your choice; do what feels right for you.

  • Higher interest debt costs you more money. For some, paying these off first makes the most financial sense.
  • Other people get more motivated by reducing the number of bills they need to pay. And once the smaller debt is paid off, this leaves you more money to pay toward the other bills.

The important thing is to make a solid plan and stick to your payment schedule.

Did you know? Always make at least the minimum payment required and avoid late fees. If you are late every month, you could be throwing away nearly $500 a year.


Weigh your options

As you work to pay off your credit card balances, assess your situation. Do you have high balances on credit cards with high interest? Make sure you have the best credit card for your situation. For example, you may be able to save money by transferring high interest credit card balances to an Global Visa® Credit Card, leaving you with just one monthly payment with a lower interest rate.

Another option is to apply for a debt consolidation loan from Global, which allows you to put all your debt into one place, using a loan at a lower interest rate than you had with your credit cards. This can be a good way to manage your debt, but be sure to avoid the temptation to rack up credit card charges again.


What makes the most sense for you?

Play with the numbers. Use this Credit Card Payoff Calculator to figure out how much money you can save just by paying a little more each month or by moving to a credit card with a lower interest rate.

For example, let’s say your credit card balance is $5,000 and the interest rate is 19.5%.

  • If you pay $200 each month, it will take you 33 months to pay off the card.
  • However, if you pay $400 each month, it will take you just 15 months, and you’ll save more than $830 just in interest.
  • If you qualify to transfer that $5,000 balance to Global Visa® Credit Card with just 10.5% interest and you pay $400 each month, it will take you just 14 months to pay it all off and you’ll save even more in interest.

If you have balances on multiple credit cards, try plugging the numbers into our Loan Consolidation Calculator to see if you can save money or pay off your balances faster by consolidating them into one easy-to-manage loan.

Did you know? When you make extra payments towards loans such as a student loan, mortgage, or car loan, you will reduce the loan duration because the extra money goes towards the principal, but it won’t lower your monthly payments unless you refinance the loan. Most experts recommend that you establish a solid emergency savings account and pay off credit card debt before you begin to pay down fixed-payment debt.

Own the process

Whatever you do, be sure to do something. Building an emergency savings fund is like putting a lifejacket on your finances. If something happens, you can still stay afloat. Then you can be deliberate in paying off your credit card balances. The quicker you pay off your debt, the less money you pay in interest.

Once you’ve paid off your credit cards, you can go back to putting your money in savings and toward retirement—and go back to a more balanced life.

3 Things to Consider When Consolidating Debt

Interested in debt consolidation? Consider the benefits, options, and alternatives.

How to Build an Emergency Fund

Rainy day savings provide shelter from life’s storms.

Move Your Debt to a Smarter Card

You could save money by transferring your credit card balance to a new card.

Knowledge is power

Equip yourself to make smart financial decisions in every stage of life—subscribe for financial know-how and more.