Dave Ramsey Has 2 Rules for Using Savings to Repay Credit Card Debt. Should You Follow Them?

Don't raid your savings to pay your credit cards without reading this.

Credit card debt can be one of the most difficult kinds of debt to dig out of. There are low minimum payment requirements on your credit cards, so you'll make slow progress unless you pay more than the minimum. And the interest rate on credit cards tends to be very high, so most of your payments will go towards covering interest costs.

If you're currently in the process of dealing with your credit card debt and you have money in a savings account, you may be tempted to raid that account to repay what you owe. Before you do, though, it's worth considering two rules that finance expert Dave Ramsey suggests you must follow if you're going to use savings to pay credit card bills.

Here's what they are -- along with some tips on whether you should follow his advice.

Ramsey's two rules for repaying credit card debt with savings

According to Dave Ramsey, you should only use your savings to pay credit card debt off under two specific conditions.

"One is that you cut up the credit cards, close the accounts, and never use those things again," he suggested. "The second is that you don't wipe out your savings in the process. Leave something in there, so you're covered in the event of an emergency. Then, rebuild your savings as fast as possible once the debt is out of your way."

In other words, Ramsey doesn't want you to repay your credit card debt with savings if you're just going to get back into credit card debt again once you've done that. Otherwise, you'd end up in a worse situation because you wouldn't remain debt free, and you'd no longer have a savings cushion to fall back on.

Ramsey is also concerned about the prospect of wiping out your savings because having no buffer in your accounts to cover surprise costs could mean you just end up right back in debt if you do face unexpected expenses.

Should you follow Ramsey's advice?

Ramsey is absolutely correct that you should not empty out your savings account to pay back credit card debt. Emergency and surprise expenses are inevitable for everyone. Whether you face an unexpected job loss, a medical issue, car trouble, a broken appliance, or even just a surprise childcare expense you didn't plan to have, there will likely come a time over the course of each year when you get hit with a bill you weren't planning on.

If you have nothing in savings to cover that, you could be forced to charge the purchase on your cards again -- or, worse, get a payday loan if you have an expense you need to pay cash for. This can discourage you from making progress on your debt and leave you trapped in a cycle where you always owe.

As far as cutting up your credit cards, though -- that's the wrong approach for most people. Credit cards are not the issue. Carrying a balance is. So if you can commit to living on a budget and not charging more on your cards than you can pay off after you've become debt free, then there's no reason to give up your cards for good.

So, you can follow the spirit of Ramsey's advice and make sure you don't use your savings to pay off credit cards unless you're sure you won't end up back in the hole again. But you don't necessarily have to say goodbye to your cards permanently before using your savings to pay them off.