GreenPath

GreenPath is a non-profit credit-counseling agency, and has been helping people achieve their financial goals since 1961. GreenPath offers free access to:

  • Financial Counseling
  • Debt Management Planning
  • Housing Counseling
  • Credit Report Review
  • Student Loan Debt Counseling
  • Loan Calculators

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GreenPath Q&A

Question: Do you think it’s better to pay down credit card debt or keep cash on hand for emergencies?

Answer: You need to think about your goals. If you want to improve your credit score, then paying down the balance would help towards that goal. The ratio between the amount of credit you have available, and the amount you have used, is considered when calculating your credit score.

The lower the ratio, the better it is for your score. Consider your current credit-available-to-credit-used ratio on the account. Is it close to 100 percent? Paying down the balance would bring the ratio down. To optimize your credit score, your goal should be to bring the ratio to less than 30 percent.

However, paying down the balance with your cash on hand could put you in a situation where you won’t have money for financial emergencies or unexpected expenses.

If possible, bring down the balance by lowering your monthly spending and paying as much as possible each month on your credit card balance. It may help you to use a debt calculator to see how long it would take to pay off the card with a particular payment each month.