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Tue 8 Nov, 2005 08:18 pm
I have racked up quite a bit of credit card debt over my student years. Now that I have a job, I have signed up for new cards with a 0% APR for a year to help with the interest, and I am paying on those right now. Left over on my old card is about $3400 in debt at an 8% interest rate. I have $3000 in stocks right now that I could sell to pay off my credit card that is charging interest every month. I am torn what to do, because I am afraid I will sell the stocks and then they will go up in value. What do you all think? Sell the stocks and pay off the credit card, or hold the stocks and slowly pay down the card and interest?
Thanks!
How much did you pay for the stock and when did you buy them?
whats more important to you
keeping your stocks which may grow?, or keeping your debt which
will definately grow? :wink:
i bought them several years ago and they have definitely accumulated in value. I don't have the exact numbers on me, but I would guess the $3000 reflects an initial investment of $2000 or so.
The best thing you can do is eliminate your debt, period.
I think freedom from debt is the best way to be. Sell the stock and then start paying yourself what you would have paid the loan sharks (uh I mean credit card companies). No one needs more than one general credit card and that should be paid off every month. I bought a house with cash at the age of 30 by never getting into debt and investing with a conservative, but growth oriented strategy. My credit card pays me money when I use it and I never pay any interest because I never spend beyond my means. Start with a clean slate and start investing again with money you would have given to the banks.
thanks for the advice
I was thinking that it might be good to just sell the stocks and get rid of the credit card debt (including the stupid interest), but I wanted to ask someone with experience.
1down5up wrote:i bought them several years ago and they have definitely accumulated in value. I don't have the exact numbers on me, but I would guess the $3000 reflects an initial investment of $2000 or so.
The reason I ask is because you might have to pay capital gains tax on the profits you make off of these stocks when you sell them. On the low end you could be in the 15% bracket and on the high end at 28%.
In your case Paying 8% on your current debt of $3000 comes out almost the same as paying 28% on the profit of the stock sale. (In any other scenario you come out even better off.)
Since what you'd pay in either interest or taxes for the year would be about the same I'd say you are better off selling and paying the debt. That way you won't be paying that 8% next year too.
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