Do I pay credit card debt or contribute to IRA??

Hi, I have about $1200 to put on credit card debt or contribute to my IRA for 2006 (I just started it and only have about $800 in the account). My credit card debt totals about $1300 at 15% interest. I am not sure if it will hurt me in the long term if I pay my credit cards rather than contribute. I appreciate your advice since I don%26#039;t know much about this, thanks in advance for your help.

Do I pay credit card debt or contribute to IRA??

You have received allot of opinions, but

You need to do some calculations to determine the right move.

You will receive a tax break from making an IRA contribution, this is what I would do.

Figure your taxes both ways with and without making the contribution.

lets say that making the contribution saves you $90 off your taxes.

Now lets say your $1,200 is making 5% in the IRA, after one year that%26#039;s $60, $60 tax free.

Now if we assume you can pay off the credit card in one year in twelve equal payments the total interest charge would be $108.04 (I have a nifty little ap on my pc that figures that out for me)

So, 90 + 60 = 150 - 108.04 = $66.08

Not a ton of dough but, IT%26#039;S YOUR MONEY!

You seem like you%26#039;re pretty smart and starting down the road to being financially aware, a very important thing.

Run the numbers to see whats best for you.

Good Luck

Do I pay credit card debt or contribute to IRA??

Pay off your debt first, then build your IRA. While you could be gaining interest on your IRA, you are paying interest in debt. Debt is never a good thing, unless it is for a house or for building a business.

Do I pay credit card debt or contribute to IRA??

Pay the card off. It%26#039;s hard to earn 15% in your IRA. So you%26#039;re losing money by investing while you have high rate debt outstanding.

Do I pay credit card debt or contribute to IRA??

Pay the debt!!!

Do I pay credit card debt or contribute to IRA??

Stick it in your IRA...chances are you will pay off the cards and them charge them up again...I did. Unless you are really frugal and will not charge the cards up again.

Do I pay credit card debt or contribute to IRA??

Pay credit card off first! Live a debt free life, you%26#039;ll be glad you did.

Do I pay credit card debt or contribute to IRA??

Send the money to the credit card people. You will make 20% to 29% by giving them the money. Every month sent the total amount of the current monthly credit card payment to the IRA account ($100). By this time next year you will have more money than most people. Stay away from carrying balances on your credit card.

Do I pay credit card debt or contribute to IRA??

Put the money in the ira then cut the cards up and use you earnings to pay card off over the next six months or so.If you pay ioff the card and then use it again you will be right back in debt and still have no ira money,but if you put money in ira then you will focus on paying off card and not using it.

Do I pay credit card debt or contribute to IRA??

figure out a way to do both...and that doesn%26#039;t mean minimum payments.

If you can%26#039;t do that then pay the debt off in 12 months. Do not fund your IRA during that time...apply those payments to your debt. Do not allow yourself to go beyond that one year line. Anyone that can fund an IRA can pay off $1,200.00 in one year. After that apply those payments back to your IRA.

Always better to stop funding an IRA to pay off debt if the debt rate is higher then the earnings rate on the IRA....and 15% on credit card debt is pretty damned high.

As you go along, remember this...Do not take money out of your IRA or 401k or any other retirement source. Better to first stop making contributions to it...then take a loan from it...then as a last resort take a withdrawal. But it%26#039;s only a last resort and only if the first 2 options won%26#039;t work.

Do I pay credit card debt or contribute to IRA??

Do both!

More towards the credit card!