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I recently paid a non-refundable housing deposit of $1,300 for summer intern housing. The company I am going to work at this summer has outlined in my contract that I will receive $2,500 to cover living expenses that will be paid out June. I paid for the housing deposit using a credit card but can afford to completely pay it off using money in my checking account. Would it make sense to:

  • Pay the card off in full (I have over 15,000 in checking currently)

  • Pay the minimum monthly dues on the credit card and then pay the debt off once my housing assistance from the company is deposited into my checking account.

  • Any other options or advice?

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    Could you clarify what the upside of minimum payments would be? Wouldn't that still incur interest? How much would that cost in interest until the company reimburses you? – amon Feb 25 at 6:08
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    Which one will cause you to have more money at the end? – user253751 Feb 25 at 11:10
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    Generally speaking, if the options are to pay the credit card debt now or later, you should always pay for it now. – Rich Feb 25 at 18:38
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    what do you gain by keeping that debt for so long? – njzk2 Feb 25 at 18:58
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    Does your card have interest, or are you in the middle of a 0% APR for X months period? – Mars Feb 27 at 7:26
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You are conflating issues.

You made a charge on a credit card. You have the money, earning near-zero interest, but are wondering whether you should use that money to pay a (presumably) high interest debt.

Of course, the answer is pay now. Most of the details beyond that are not relevant.

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    There is no interest charged if a card is paid in full every month. – JTP - Apologise to Monica Feb 25 at 14:19
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    @Rolexel How do credit cards work in France? I live in Bulgaria and I am aware of at least 3 other EU states that are the same - no debt on CC, no interest to pay. – fraxinus Feb 25 at 14:42
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    @Rolexel Interesting (no pun intended.) Thankfully, credit cards are not at all like that in the US. As long as you pay off the charges in full before the due date of the first statement on which they appear, there is no interest. Like many Americans (if not most,) I use credit cards for most of my expenses and have never paid interest on any of them. – reirab Feb 25 at 16:30
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    @Rolexel: In the USA even personal loans compute the interest charges only on what is actually still owed. Charging "the interest you would have owed" would be considered a kind of prepayment penalty and there can be clauses like that, but due to competition between lenders only those in the most desperate financial situations would be unable to avoid such terms. – Ben Voigt Feb 25 at 16:50
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    @gerrit - what you describe isn't a 'charge', it's a 'cash advance'. Unless, you'd really like to say that you "charged a cash advance" but that's begging the question. – JTP - Apologise to Monica Feb 25 at 17:13
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If you have 15,000 in your checking account, you should see these two events (paying for house and getting money for internship) completely separated.

You pay your bill when it is due and no interest is charged (otherwise you'd pay more). Even if that leaves you with 10% less in your account, that's the cheapest way of doing it.

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Pay the minimum monthly dues on the credit card and then pay the debt off once my housing assistance from the company is deposited into my checking account.

You're losing 2% (the inflation rate) on the checking account $15,000 , and losing 18+% APR on that $1500 CC balance every month you don't pay it off.

That's the guaranteed method of starting life in expensive, wasteful, unproductive debt.

The only fiscally prudent moves are:

  1. Pay off the CC debt now. No need to wait for the statement. Just log in to the CC web site and pay the bill.
  2. Move the unneeded portion of the remaining checking account balance into an online savings account so as to lose much less money to inflation.
  3. Even better is to move some of that money into a 12 month CD or two so as to break even with inflation.
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    +1. But I'm curious, why the first advice? "Pay off the CC debt now. No need to wait for the statement". Isn't paying CC bills in full upon receipt enough? – JTP - Apologise to Monica Feb 25 at 14:06
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    I don't understand how that's simpler. Say over a month I buy 4 things. You suggest I logon to the CC website and pay each off immediately. Or I could pay the bill at the end of the month. Paying the whole thing once seems a lot easier than paying 4 times. – Sam Dean Feb 25 at 15:45
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    @SamDean I don't feel the "pain" of spending the money until it leaves my checking account, which means I don't feel the pain when it's charged on my credit card, even though I have a budget and track all my spending religiously. Paying my credit card when I spend the money keeps me from overspending. It's just a different preference/mode of operating. – lizziv Feb 25 at 16:37
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    This answer is worded far too strongly. The first point makes no difference whether you pay off now or after statement close, other than losing out on a slight bit of interest if you pay off sooner. The other two points are not universally true. My bank pays a higher interest rate on your checking account than on CDs if you use direct deposit and your debit card each month, for example. These points aren't bad advice, but they're certainly not "the only fiscally prudent moves." Also, with $15k, honestly, I'd say putting part of that in real investments is more fiscally prudent. – reirab Feb 25 at 16:37
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    @Jer "you're forgoing interest that that money could be earning". As mentioned in a previous comment: if this had been 45 years ago when checking accounts paid a noticeable interest, my answer would have been different. – RonJohn Feb 25 at 18:21
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I always pay off my credit card (the full sum for that month) on the last day of 0% charges.

If you have the money to pay it off, it's wasteful to keep this debt and pay interest on it.

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    That's pretty risky, since many CC with 0% say that if you don't pay it off during the 0%, you end up owing all the back interest as if it had been accruing normally. If you miss that payment at the end, even by a day, you will end up paying more than expected. Since the OP has the money now, it's better to pay it off sooner than later, since paying it later is similar to gambling. – computercarguy Feb 25 at 17:51
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    @computercarguy "gambling" - that's an exaggeration. It's not risky for me. I pay off my card on the same day every month. – Robert Andrzejuk Feb 25 at 18:53
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    Sure, when you are healthy and employed. But what happens if you lose your job or are in a car wreck? What about being on a vacation? There's any number of other reasons why people miss their normal payment days and why waiting to pay something like this is a risk. Not to mention being frivolous with purchase "because you have the money", only to end up not having it, which gets too many people into trouble. I should know, been there done that. – computercarguy Feb 25 at 19:02
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    Risky. Why not pay it off immediately ? Payment systems can sometimes delay payments – vikingsteve Feb 26 at 8:08
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    Robert - Yes, if at the same bank, the transfer is same day. Different banks, I go to my checking acct, and the payment is made next day. People here are over-reacting to the potential for a missed payment. – JTP - Apologise to Monica Feb 26 at 19:17
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What's your concern to paying it off, that it will "confuse numbers" since money is bouncing around everywhere? What's the amount of interest total you'll end up paying? If you're comfortable paying that much interest, then it doesn't matter either way. If you want to save the interest money, pay it off now. Also having high percentages on credit cards harms your credit score short term (but once you pay it off it goes back to normal IIRC). Unless your bank gives you some kind of bonus for maintaining a 15K balance...

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