One of the questions that is often sent to me is whether one should to pay down credit card debt or build an emergency fund first. As with most issues dealing with personal finances, a lot depends on your particular circumstances. One readers explains hers and is looking for advice:
I just read your post about credit card debt vs. emergency fund. I completely agree with the concept and appreciate your example. I like numbers and they really help make the point.
However, I’m not sure what I can do in my situation. I have three credit cards that are in a debt management program and are therefore closed and unusable (~9K @ 9.99%, ~3K @ 6.99% and $450 @ 6% – paying $350/month total) I have two other credit cards – one is a store credit card, which is useless for emergencies and the other only has a limit of $300 @ 27.99%!!! (I kept going over my limit). Obviously, I should pay off the $300 balance and stop using the card, but that surely isn’t enough for an emergency fund. Should I just put some money into savings then?
Given the circumstances of this reader, what advice would you recommend?