Paid off credit card. Where should the monthly pay go?

[sweetfeet]

We paid off our credit card yesterday! So now we have no credit card debt. At all. Our only other "consumer" debt is my car. The car has 0% financing and I am 2½ years into payments.
Should I take the $50 that used to go to the card and apply it to the principal of the car loan or should I put it in a savings account?
ETA: I forgot completely about dh's student loan. He doesn't have to pay on it currently because he is back in school fulltime. The interest on the student loan is 4% and he owes $4k.
My thought is that the car is 0% financing so there really isn't a benefit of paying it off early. We do pay $20 extra a month on the car already. If I opened an ING account I could earn 3% back on the money.
I'm pretty financially smart but I'm tired and my school work is sucking my brain cells. Any thoughts? Is my line of thinking accurate? WWYD?

[babybugmama]

Start paying toward dh's school or a savings account earning interest to pay off school. You will be so glad not to have that debt and $4k isn't bad for school debt.

[Daphnes_mama]

Congratulations on being credit card debt free! That is really exciting!

I would look at the interest rate for the savings account, and also the interest you are charged on the car loan. I would put that money wherever the interest is higher, which I suspect is the car loan. If you pay off that loan ahead of time, you are that much better off. You can create your own repayment calculator on an excel spreadsheet and figure out how much money you would save by paying that loan off early.

[lenore80]

congratulations! No advice here, but that must be a great feeling to pay that off!!

[afishwithabike]

I'd work on whichever is the lowest debt. Get rid of the risk. (debt=risk). It will disappear quicker then you can focus on the next step in your journey to financial freedom.

[babybugmama]

Originally Posted by Daphnes_mama

the interest you are charged on the car loan.

She said she had 0% financing...which is why I suggested she go for the school loan at 4%, unless savings gives a better return...which I doubt.

[Daphnes_mama]

Originally Posted by babybugmama

She said she had 0% financing...which is why I suggested she go for the school loan at 4%, unless savings gives a better return...which I doubt.

Duh! I did not read this correctly. My apologies.

Anyway, I agree with you. Put the money wherever you will obtain the highest interest. If you are racking up more interest on the student loan than the car, then put the money there. If the savings yields more interest, which I agree is unlikely, than put the money there.

[nwaddellr]

Is it a subsidized or unsubsidized student loan? If it's subsidized and you won't pay interest until your DH is out of school, put the money into a savings account that's there for emergencies and then when he is out and paying off the loan, do a big lump payment early. If its unsubsidized and you're paying interest already, start paying off the loan now - you'll "make" more money that way.

[miriam]

Congratulations!

Good for you!

Debt is bad. I am glad you are getting out of it and making plans to stay out!

[sweetfeet]

The loan is subsidized so we aren't paying anything on it right now. It has just been deferred for 3 months. So perhaps I'll do $50 to the student loan and continue putting our surplus into savings. My dh is paid every 2 weeks. Any money left over from the pay period is deposited into savings. I'm still trying to cut back on my spending and seeing more money go into savings and to pay off debt is so exciting.
Thanks for all of the congrats. It feels really really good.

[Rhiannon Feimorgan]

No advice, but Congratulations!

[Shiloh]

I think savings is a great idea then when the student loan comes due you can put it down on that or have it for emergencies so you don't have to borrow $ on the credit card again. I'd put aside what the student loan will actually cost you on top of the $50 and that will help cut you back you big spendah.

PS put the card away!

[weliveintheforest]

Congrats!
No credit card debt is a big thing. I'd put the $50 in savings or on the student loan. Putting 20 extra on the car every month is great!
I hope I can be in your position soon!

[sweetfeet]

Originally Posted by Shiloh

I think savings is a great idea then when the student loan comes due you can put it down on that or have it for emergencies so you don't have to borrow $ on the credit card again. I'd put aside what the student loan will actually cost you on top of the $50 and that will help cut you back you big spendah.

PS put the card away!

We haven't used the card to purchase anything in a long time. It is frozen now so in a real emergency it is there. I want to keep the card open because if we closed it we'd have no credit cards at all and I believe that hurts your credit score.

[RiverSky]

Emergency account, all of it. Fill up the emergency account until you have 3 months of money, all bills, food, gas, spending money, etc. If you have a funded emergency account, then... Make sure your emergency account is in an easily accessible (no fees to withdraw) account, perhaps a Money Market account (around here you get 3% interest at the credit union). Don't spend this money at all unless your family loses their income or some other drastic event happens and you have no other savings accounts.

Savings account. A dental emergeny can cost tons and if you have $50 a month going towards a savings account, then you won't be caught in a bind and you won't have to put emergencies on a credit card. Or let's say a friend or family member decides to get married a few states away...wouldn't it be nice to go to that? Well, this savings account might be where you could take the money from to do so.

If you have a well funded savings account...why not a vacation fund? $50 a month would add up to $600 a year. Could you think of a vacation you'd like to take once per year that might cost $600?

I think 4% for a student loan that could be deferred if need be is a nice low interest rate. If you end up having a large enough savings account, you could always pay it off in one lump sum but if you spend your $50 per month on it, then have a $500 emergency bill next year, where are you going to get that $500? Credit cards? Yuck! (unless necessary, then credit cards are WONDERFUL)

And the 0% auto loan has a fantastic rate. In the future, you could always pay it down with lump sums from your savings accounts, but why? Just keep the money in your savings account and if you ever come up short, use the savings account to pay your auto loan payments.

Good for you, paying off your CC's, by the way! Congrats!

[RiverSky]

Originally Posted by sweetfeet

We haven't used the card to purchase anything in a long time. It is frozen now so in a real emergency it is there. I want to keep the card open because if we closed it we'd have no credit cards at all and I believe that hurts your credit score.

Yup, it would hurt your credit score but never ever using it doesn't help either. One day your credit card company could just turn it off for non-use. I suggest that once or twice a year, you pay for groceries or something with it, then immediately pay the bill and throw it back in the freezer.

[mightymoo]

I personally would put it into the savings account. Yes, its great to get that school loan paid off, but a student loan is good debt (low interest, etc) and its not a huge one. The difference between what you would save if you prepaid the loan versus put the money in the savings account is not huge. I would be more concerned about building up a rainy day fun in cash so if you had any emergencies, you could use that rather than paying high interest rates on your credit card (if you could even use it, depending on the emergency)

Once you have a few months pay saved up as an emergency fund, then start making extra payments on the student loan.

[EmsMom]

yEAH! That is terrific. Such a hard thing to do. If you don't already have an emergency savings account I would put the $50 towards that. Are there other financial goals that you have? Such as buying a house starting a business of something. Because the interest on the student loan is so low, I would save towards an emergency fund first and then save towards a house purchase if that was in my goals. But if you don't have any biggie goals, then maybe just get a few thousand in the bank for emergencies and then start on the student loan. Because of the 0% interest, I would only start paying off the car when the student loan was gone. Just my $.02!