Part of any sound debt relief strategy is having an emergency fund — a place to put money, away from your other funds, so that if the need arises, you can handle unexpected expenses without adding to your debt burden. Depending on your plans, you may want to have as much as three to six months worth of living expenses saved up in your emergency fund, but it may not be wise to wait until you have that much saved before you start to reduce your debt.
It may be better to start small, pay down your debts and then return to building your emergency fund. For example, some Ally customers will start their emergency fund with a modest amount — perhaps $1,000 or so — and then tackle their debt relief strategy, putting as much money as they can toward their outstanding balance(s).
Can a CD be Used for Credit Card Debt Relief?
Yes, but some CDs may not be the right choice for you. For example, if your CD charges penalties for making an early withdrawal, using the money for emergencies might be a problem unless the penalties are still less than the interest you'd expect to pay by taking on more debt. On the other hand, consider the Ally No Penalty CD, which gives you maximized earnings and maximum flexibility. With it, you won't have to pay a penalty should the need for cash arise after the first six days following the date you fund your account.
Of course, every situation is different, and it definitely pays to know your options before you commit to something that doesn't fit your debt relief strategy. Whatever you choose, you can count on us for products that help you make good financial choices.