Paying off credit card with CU loan

Would just appreciate some input on a small query.

I currently owe €1200 on my credit card.
The APR is 19.8% and for cash is 23.4% so I'm paying a fair bit in interest.I'm going to try and clear 2-300 off it this month. I have no other debt.

I have approx €4150 in savings split between the bank and credit union.

I just can't decide whether I'd be better to use my savings to pay it off or get a loan from the credit union to clear it? The CU have indicated they would consider giving me a loan for this. I'm reluctant to use my savings as it would take me a while to build up to that level again if I did. I can't seem to clear the thing, entirely my fault I should add so I might look at lowering the limit on it.

Any thoughts would be appreciated.

Folks

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OP
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Brendan
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Whilst the logical financial decision would be to withdraw €1000 to clear the cc (after paying the 2-300 this month),I can totally see your point that its hard to build up savings again.
So,borrow a grand off the credit union for a year.This will cost about 40 euros in interest for the year.Set up a standing order for say 90 or even 100 a month to the credit union and just forget about it.You'll have the loan paid off by next January and then the monthly s/o will go to increase your savings.Don't forget to pay off the credit card in full immediately.
One thing I don't quite understand is that the credit union have said that they would consider you for a loan.It's your money they are lending risk free!(Assuming you have €1000 in the credit union.If not move a bit from the bank to make up your balance)

Why not pay off the debt with cash and set up a S/O to your savings account instead. The above mentioned solution only makes sense if you are getting a better rate on your deposits than the cost of a new loan. Otherwise it's just a complete waste of money!!

If it were me, I would withdraw €1200 and immediately pay off the credit card. If you could just redirect €200 a month for the next 6 months to your CU account your savings will be back on track.

Also, would you not consider putting your money into a savings account that would earn you a lot more interest than you are getting from the CU (if any at all!).

44brendan said:

Why not pay off the debt with cash and set up a S/O to your savings account instead. The above mentioned solution only makes sense if you are getting a better rate on your deposits than the cost of a new loan. Otherwise it's just a complete waste of money!!

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The point being that you HAVE to make the loan repayments,but you don't HAVE to put money into savings.So you could end up in a years time down a grand on your savings.

vandriver said:

The point being that you HAVE to make the loan repayments,but you don't HAVE to put money into savings.So you could end up in a years time down a grand on your savings.

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That's my concern. It's not easy to build up savings and while I might have good intentions to do it there is always some unforseen thing that crops up that I need to pay for.

With regards to moving the savings to a higher earning deposit account I would rather just keep a bit of money in the credit union. It's a good CU and I'd rather take a loan out with them than anyone else if I needed it.

I guess I just need to bite the bullet and decide. Thanks.

I fully appreciate the point! However OP has >4K in savings. I acknowledge that currently, people have a high aversion to dipping into savings, but I think the economics of this transaction V's the associated risk make no real sense!

EvenStevens said:

That's my concern. It's not easy to build up savings and while I might have good intentions to do it there is always some unforseen thing that crops up that I need to pay for.

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Then you have money management issues that you need to tackle. Otherwise you will continue to use your credit card incorrectly. Ultimately maybe getting deeper and deeper into debt - that's exactly what credit cards are designed around. Your aim should be to use the credit card sparingly and only use it if you know your going to pay it off totally monthly with zero interest.

I recommend you read a book called Maxed Out.