Q&A with Carmen: Cash Out Non-retirement Stock Account To Pay Off Credit Cards?

Carmen Wong Ulrich
Carmen Wong Ulrich

By Carmen Wong Ulrich

Question: Here is the problem, my husband and I owe approximately 100K in credit card debt. We also have a stock account which is down 13% at present. Should we sell the stocks at a loss and pay the credit debt off? We are About 1700.00 shy in income to make all the payments per month, so I have been drawing down our cma account
Each month to cover. Most of our credit card debt is at low rates of 3.9%. Please advise what you feel would be best to do next. Thanks in advance.

-Pat W.

Answer: If by 'CMA' account you're talking about a cash management account, that's what you should use to pay off your debt. Though you have excellent interest rates on your cards, you're still out that money even if you're earning 4 or 5% with your CMA. You can say 'bye-bye' to that 1% earning spread if you pay any fees (late, overdraft, etc.) on your credit cards. Take cash that's already in the bank to pay off your cards and make sure your retirement savings and investments are fully and regularly funded. Money in individual stocks is always money that you need to be able to afford to take a hit on. I'm not sure what you're invested in now, but you could cut your losses, pull out of your stocks and pay off debt as well. But it's the cash that's 'sitting' while the stock may have room to grow.