Featured Wise or Foolish financial move?

I would suggest that if able, you should not run down your emergency fund, but build it up. It may be needed later. If you cannot pay your computer off before the interest kicks in, then raid it. I think that there is something legitimate about feeling the oppressive burden of debt. If it bothers you, or if your wife is feeling it, pay it off with the fund.

Look at this episode as an educational experience. Learn to say no. Toys are not worth the headache of unsecured debt.

 

I don't know the terms of your offer. If it is a 0% credit card, those typically have a deadline on them, say "0% through June 2016 on all purchases". If this is the case:

1. Stop using the credit card for anything else.

2. Take the number of months of 0% interest and divide it into the purchase price of the computer. In my example (above) that would be $1,272/12 month or $106 per month. Make sure you pay at least $106 per month. The idea is to use the free money but pay off the entire amount before the promotional rate expires.

3. Stop using the credit card for anything else.

Wait a minute...you have a debt with the IRS? Typically they charge interest, and it's at an exorbitant rate. Am I correct? If so, that debt is your payoff priority. You still need to make your 0% credit card payments, but you need to pay off the IRS debt in bigger chunks than a minimum payment. If you had the cash for the computer and your IRS debt is $1,200 or less I'd pay off that IRS debt in one payment. Otherwise it will bleed you with accumulated interest charges as bad or worse than a credit card.

Can't speak to Dave Ramsey, haven't listened to him. I will say that he's wrong to say "no credit cards ever."

So, you put your IRS debt onto a credit card? Is that right? If so, that affects my previous advice. Please tell me that credit card interest rate is less than the interest rate if you were making payments directly to the IRS.

Are there two credit cards in play--one at 0% with your computer purchase on it, and another one at X% with your IRS debt on it? Or are they both on the same card?

If there is only the one credit card being used, it complicates the problem. If you make only the minimum payment the credit card company will apply your payment to that part of the balance with the lowest interest rate. If you make more than the minimum amount they are required by law to apply that amount to the balance with the highest interest rate. (This was one of the few laws passed during the Obama administration that was worthwhile.)

I can't help you unless I know the full story of your credit card debts. PM me and I'll help you out, or if you don't mind, post it here.

 

Missed the IRS bit. Changes things. I would advise what ITL suggests.

 

I did too. He might have two credit cards, one with the new computer and one with the IRS. Or it could all be on the same card. Hard to give advice until all the parameters are known.

 

Plus any other debt...

 

My bad. My computer has 16GB RAM, not 16MB. LOL! Sorry for the mistake. I'm running Windows 7.

 

OK, and how much of that $6,000 balance is at 0% interest?

 

Well, if you selected zero on your W-4 that means your employer will withhold the maximum amount from each paycheck. Which means the IRS will be overpaid a little bit each week, which means you'll get a refund next year when you file your taxes. Ideally, if the withholding is set up correctly you want to neither owe them or get a refund.

 

OK, that makes it a lot easier. How long does the 0% rate last? When will it expire?