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Here's another way to consider your debt. You're currently paying a very low rate of 1.99% APR to borrow $1000. If you had your $1000 of savings in a totally free Internet saving account such as www.emigrantdirect.com at 5.05% APR interest you'd actually be earning an interest spread of 3.06% APR. This is one way banks make money by borrowing money at a lower rate and lending it back out at a higher rate. Of course, a bank will do this on a much larger level where a couple % points can make a larger difference.

I would highly recommend AGAINST putting your e-fund of $1,000 to an online bank such as ING or EmigrantDirect. The purpose of that $1,000 is so you can access it IMMEDIATELY in a true emergency. With ING or Emigrant, you'll be waiting 2-3 business days to get to it.

I recommend putting that $1,000 into a savings account at a local brick & mortar bank. Once you have more of an e-fund built up, you can consider putting a portion of that into an online account to get the better interest rate. However, I would still keep a minimum of $1,000 at the local bank.

Before I got married, I kept an e-fund of $2,000 at the local bank + any extra at Emigrant. I figured that $2,000 was the most I would need in pretty much any "emergency" I could fathom (replacing my air conditioner).

-Agg97

-Agg97
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