According to a Bankrate.com report, 28 percent of Americans have more credit card debt than savings.  Even more staggering, 17 percent have neither an emergency savings account nor credit card debt.

The overall personal savings rate for Americans has fallen as their spending has increased. According to the U.S. Department of Commerce, the U.S. personal savings rate fell to 4.2 percent in November of last year. That is near the recent low mark of just under 3 percent which came at the end of 2007.  In a study from Corporation for Enterprise Development, 44 percent of households in the United States are “liquid asset poor,” meaning they have less than three months’ worth of savings.

So what should you do, build up your savings or pay down/off your credit card debt?  With the average American having credit card debt of $5000 and interest rates ranging from 13% to 15.4% wouldn’t make more sense to pay this debt down as fast as possible?  Wouldn’t be wiser to do that than to have a “rainy day” or emergency fund? Well, let’s look at why University Credit Union says not necessarily:

“Congratulations. You have just speeded up the debt merry-go-round,”

“Let’s say that like the average consumer you have no emergency savings, not even $500 or $1000. You owe several thousand dollars on your credit cards. Though you have been paying a little extra on credit card debt out of the little disposable income left after paying bills and essentials each pay period, you essentially live paycheck to paycheck. Then your car unexpectedly needs repairs or the dryer dies (and your family requires several laundry loads daily). What happens? You put those repairs or the necessary new appliance on a credit card and your debt load increases.

Congratulations. You have just speeded up the debt merry-go-round. You are right back where you started in your attempt to pay down credit card debt. Having an emergency fund of $1000 would typically cover such surprises without adding new debt. Then you could go on using disposable money to pay down debt and replenish your emergency fund.”

The smart thing if you have credit card debt, no emergency fund and you have some disposable income, would be to do both… make an effort to curb your credit card spending and build your emergency fund.  For more information of building your emergency fund check out our recent article “How Do You Know if You Need an Emergency Fund?”.

If you however, find yourself just having trouble making ends meet and the idea of both reducing your credit card debt and building an emergency savings seems out of reach, it is likely time that you talked to a professional about your finances.

The professionals at DebtHelper.com can explain the benefits of a debt management program and provide you with a fresh start.

One of the biggest long-term benefits of the debt management plan is the reduction in interest. Reduced interest allows you to pay off your principal balances faster while saving you possibly thousands of dollars in finance charges.

In order to determine if you are eligible for a debt management program, you can fill out an online budget application form now and then you can contact one of their Certified Personal Finance Counselors© at (800) 920-2262.

DebtHelper.com can currently accept clients from the states listed here. DebtHelper.com is licensed, insured and complies with all state licensing requirements to ensure mandated regulations are followed. They are diligently working on becoming licensed in every state and are opening new states monthly.

Please call (800) 920-2262 if you have any questions. DebtHelper.com’s consultations are free, call them any time.