Dear Liz: Do you recommend taking funds from a money market account to pay off high-interest credit cards? We are ages 57 and 60. One of us is retired and one is still employed.
Answer: The answer to this question is more complicated than you might think.
All things being equal, it makes sense to use cash in a low-interest money market account to pay off much higher-rate debt. But all things are rarely equal.
You may be taking a big risk if the money is all the cash you have in the world and paying the debt would wipe out this emergency fund. Card issuers are reducing credit card limits, so you might not be able to access your credit again in an emergency, such as a job loss.
If that’s the case, you may want to use only a portion of your cash to pay down the debt and pay the rest off out of your current income.