To ask if you're in debt but still have savings?

[mozzarellasticks]

Just that really. Wondering if anyone out there has savings but are still in debt (credit cards, finance etc)
Asking as someone I work with recently took out a loan to pay off large credit card debts but they still have money in savings.
Why do you have savings AND debt?
Should debt not be paid off first before saving money? Or use the savings to pay off debt?

I have a small emergency fund I've scrapped together. I don't want to be in a position to need more debt to cover an emergency like a flat tyre or something. Everything else goes onto paying off our credit card.

Depends on the interest rates of both.

Sometimes it's actually ok to keep the debt and savings, because the savings earn more than the debt costs.

I financed a new kitchen and some renovations on a 0% credit card even though we've the savings to pay it off. The card is 0% for 3 years, so why use up my savings when the "loan" isn't costing any extra.

As Bryjam says, I have 0% interest credit card with some debt. Doesn’t make any sense taking savings out of an account paying me interest (however low) to pay that of.

IMO you definitely should still have a small emergency fund if possible (you don't want to have to get into more debt). Depends on the debt though - if the interest on the debt is less than the interest on the savings account then it makes sense to have both.

Credit is not debt. Unmanageable credit is debt, but choosing to borrow money you can afford to repay isn't.

I have a balance on a 0% credit card which is being cleared off within the 0% period. I have savings which are far higher than the card balance.

I am perfectly happy with it - the repayments are easily affordable and it keeps the cash available if required.

Responsible use of credit is a good thing.

I can see the logic in not pouring your savings into debt, even when paying interest. What do you do if you pay off a £5k credit card debt and then your car packs up? Or boiler, washing machine, oven, etc.

As someone else said, it depends on the interest rates.

DH and I are high earners but most expenditure every month is on a CC. It's paid off in full.

DD took full student loans on the understanding she'd invest the cash as she didn't need the money.

We actually paid the last mid-5-figure-sum of our mortgage with an interest free loan from another bank.

In short, manageable debt is fine and is the smart route in some situations.

We have about 3 months wages in savings. We also have debt like mortgage and loan.
Our savings are there for emergency - as someone once said, you are one wage package away from being in absolute poverty. Ok for us it's 3 ...

I have savings.

Debt wise I have a (fooooking massive) mortgage. And a sofa on interest free credit.

I just bought a new car because my old one had more faults than it was financially viable to repair. I'm on mat leave at the moment and whilst we have savings I'd rather not touch them for something unexpected that I can pay off within a few months of going back. I always have an interest free credit card on the go, I usually use it for work expenses and get rid when the interest free period is over. Just got one with Tesco interest free for 28 months I applied for £2000 and they gave me £12000, so the car has gone on there and once I'm back at work we'll clear it in six months having paid no interest.
DB has just got his new kitchen interest free for three years, he has put the money into an inaccessible saver with decent interest rates for two years. He'll pay the kitchen off when that ends and will pocket the interest. I don't consider either of those debt, just a sensible use of credit

Oh and almost all expenditure goes on my points credit card but gets paid off in full every month on a DD

I have a high credit limit, so want to build up my cash savings. Buying a car is going to almost wipe those out, and I'd like to have the money firmly available. I'd leave a small amount unpaid accruing a small amount of interest rather than decreasse my savings contribution.

But as above, credit isn't debt.

I have emergency savings totalling about £2k and debt of about £6k. I save £200 per month and pay off £390 of debt per month. I don't throw that £200 at the debt instead because it's in a work savings scheme so the savings have the opportunity to make me much more money in the long run.

The debt is at a low rate, the interest was paid in front and therefore I don't gain any benefit from paying the debt off early except peace of mind.

We bought a car on a 0% credit card (c. £4000). Our savings tend to earn about 3-4% (mostly low risk stocks and shares ISAs) so across the 2 year 0% finance period we'll "earn" around £250 on the savings. We repay something like £170 pcm which means we'll pay it off in the 0% tineframe. We could pay it off immediately if we needed to so I don't really consider it a debt as such.

On the opposite side of this, I think a small emergency fund of cash savings (or "treat as cash savings" ie can go into branch of your bank or building society and gain access within hours) is pretty important, especially if you've got DC and/or a home to run. However for those that can't save, or choose to put cash away into a pension or something else with restrictions on withdrawals, available credit can serve a similar purpose to cash.

I'm sure I saw Martin Lewis say recently that, with savings generally earning poor interest at the moment, it is generally better to clear debt than keep a load in savings.

But obviously if you're making sensible use of 0% interest cards etc then that's different. And I would always want to have some savings easily accessible for emergencies.

I'm in a Credit Union and we borrow against our savings.
Its a good idea to keep some savings as a buffer. The idea that you can't take out a loan when you have savings is a bit puritanical. You don't have to be eating bread and water before you apply for a loan.

Obviously some people want some emergency money which is why they'd have some savings despite paying back a loan. Some people are just terrible with money though. I know people one woman who insists on making every major purchase through credit despite high interests rate. Meanwhile she has money sitting in a savings account earnng almost nothing.

Credit is not debt.

No, its the opposite.

I don't want to be in a position to need more debt to cover an emergency like a flat tyre or something

You could always put the flat tyre on the credit card if it happened, as you wouldn't pay credit card interest until it actually happened.

By keeping a few hundred quid in savings for emergencies means you will pay more in credit card interest, which could be fairly significant.

But the best thing would be that, if you have any loans and credit cards, to get them as cheap as possible. Unless you have a bad credit rating, you should be able to get any credit card debt onto 0%, otherwise it's very expensive.

@rollonoctober I also heard Martin Lewis say the same!

Very good points brought up in all previous posts. Thank you for all of your responses so far - this has definitely broadened my knowledge

"Credit is not debt. Unmanageable credit is debt, but choosing to borrow money you can afford to repay isn't."

Credit is debt. It is money you owe to someone else. That is debt. It might not be a bad idea.....as you said you can afford to pay it off. But don't kid yourself it isn't debt. - what happens if something happens and you can no longer pay it off? It is still a debt.

Credit is not debt. Unmanageable credit is debt, but choosing to borrow money you can afford to repay isn't.

It's still debt and I think the point the OP was making was that some people will be paying interest on their credit card despite having money sat in the bank which isn't earning as much interest. This is clearly irrational whether or not they can afford to pay off their monthly credit card bill.

It really isn't irrational, unless you think of interest as an evil that should be avoided at all costs.
Ready cash is a different thing to a manageable debt.

Because I’d rather have access to cash in my savings and my debt is 0% interest on a credit card.