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I'm new to the Fool, but I have some investments. These are a Fidelity Mutual Fund opened about 10 years ago, and retirement funds from my employer (TIAA/CREF) with a voluntary monthly contribution from my paycheck. The Fidelity Mutual fund has more that tripled in value since I opened it.

The problem is I have been slowly building up credit card debt to where I owe several thousand dollars. I have over the years moved from one card to another when a better interest rate is offered, but it hasn't helped much. A recent purchase of a new car means that my monthly payments to the credit card companys have been reduced. (but I am paying more than the minimum).

The question: Is it better to liquidate some of my non-retirement mutual fund investment, use it to
Pay off the credit cards, (and cut up all but one card, to be used only for emergencies). Or, would I be better off borrowing against my retirement funds, or some other means of securing a lower interest loan to pay off the credit card debt? Note: The amount I owe on my credit cards is about 1/7th the amount currently in my non-retirement mutual fund.

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DO NOT borrow against your retirement! You'll lose all the interest you could be earning on it!

Instead, reduce your expenses, increase your income, or do both at the same time to reduce the debt. A part-time job is seriously easy to find during the holiday season, and could wipe out a Credit Card or two with the money you earn.

And, reducing your expenses isn't that hard either, although it takes some getting used to. Go to a free internet service (Juno, etc.), or stay after work and use the computers like I do. :) Also, take your phone line down to the minimum (no caller ID, or call waiting!), and start brown bagging your lunch once or twice a week. Put every penny you save towards the CC debt, and it'll be gone in no time!

Incedentally, if you provide the balances and interest rates charged on the cards, we'll be able to give you specific advice on how to go about it the fastest way.

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I don't see anything wrong with withdrawing 1/7 of your non-retirement savings to pay down debt. But I have a few things to preach about before I condone it.

1. The BEST situation (financially) would have been not to buy a new car yet.

2. If you pay off the cards, can you resist running them back up again? If you run tehm back up you will have effectivly thrown away 1/7th of your fund.

3. Is the Fund continuing to do as well as it has for the last 10 years? Sounds like a good percentage that might be making more than the cards are costing you. If this is the case you are making more than you are loosing so you should leave it in and pay down the cards with your regular income as best as you can.


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You'll lose all the interest you could be earning on it!

Or saving the money that you are losing on it and paying yourself back the interest.

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nolalou -

First of all, great job on your efforts to save and invest. As to the credit debt - there are a few things you need to consider. What interest rate are you paying on your credit cards? If you can access your "non-retirement" mutual funds to pay off the debt without a pentalty, this may be a good idea. HOWEVER, you absolutely do not want to use invested money to pay off debt if you are just going to turn around and run that debt back up.

Your suggestion to pay off the debt on the cards and then cut up all but one is very wise. Remember though, once you pay off the debt, celebrate your "debt-free" status and don't let yourself add up that credit card debt again. If you choose to pay off the card debt, perhaps you can use the money you would normally be paying towards the cards to put away in an emergency fund for things you have previously purchased on the credit card. This way you don't need to use the card except in cases of a TRUE emergency.

Just my 2 cents. And welcome to the FOOLS - watch this sight often and you'll learn a lot as I have.

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