Watching your savings balance grow can feel reassuring.

But if you’re paying expensive interest on a credit card at the same time, the numbers could be working heavily against you.

The average credit-card purchase rate is now 35.8 per cent APR, according to Moneyfacts, while the average easy-access savings account pays 2.54 per cent and the top savings accounts pay 5 per cent.

So which is most important to tackle first? Expensive credit-card debt, or avoiding leaving yourself with so little cash that the next unexpected bill sends you straight back to borrowing?

The maths is clear: debt first

Moneyfacts calculates that someone with £3,000 on a credit card charging 35.8 per cent APR, making fixed repayments of £300 a month, would take a year to clear it and pay an extra £515 in interest.

Leave £3,000 untouched in an average easy-access savings account paying 2.54 per cent, meanwhile, and it would earn around £76 over a year. Even at five per cent, the return would be only £150.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, says: “Clearing expensive card debt should always be considered a priority compared to holding small amounts of cash savings, as the amount owed on a typical credit card charges way more interest than can be earned on a flexible savings pot.”

In the Moneyfacts example, around two months of card interest would be enough to wipe out an entire year’s interest on the average £3,000 savings pot.

Jason Hollands, managing director at Evelyn Partners, says: “Paying off an interest-bearing credit card is effectively the equivalent of earning a guaranteed return equal to the interest you avoid paying.”

But that doesn’t necessarily mean emptying your bank account to do it.

How much should you keep in savings?

Drain it completely to repay a card and before you know it, a broken boiler, car repair or sudden fall in income could simply put you back where you started.

Simon Trevethick, head of social change at debt charity StepChange, says: “In many cases, interest rates on credit cards are much higher than interest earned on savings, so it often does make financial sense to use some savings to reduce or clear expensive debt.

“That being said, using all your savings could leave you without a financial buffer and increase the likelihood of needing to borrow again if an emergency occurs.”

Hollands says people should ideally aim for enough emergency cash to cover three to six months of essential spending, although the right figure will depend on circumstances.

“The right approach will depend on your individual circumstances, including the amount of savings you have, the level of debt, and how secure your income is,” Trevethick says. “Maintaining a modest emergency buffer while tackling debt can often be a sensible middle ground.”

Which debts should come first?

Before using savings to clear a credit card, make sure more important bills and arrears are covered.

“One rule to always be aware of before anything, is that meeting your priority debts should come before saving money or paying off other types of debt such as credit cards,” Trevethick says.

These can include mortgage or rent payments, council tax and energy bills.

What about a 0 per cent balance-transfer card?

A balance-transfer deal can change the calculation. Moving expensive borrowing onto a card charging 0 per cent for a set period could allow you to keep more of your savings while paying the balance down without interest.

At the time of writing, Moneyfacts lists a TSB card offering up to 38 months at 0 per cent, with a 3.49 per cent transfer fee. Fee-free deals are also available, although typically for shorter periods, including a Santander card offering 12 months at 0 per cent.

Springall says: “The crucial point to watch out for with balance transfers, aside from any upfront fees or eligibility terms, would be to avoid having the debt incur interest after its 0 per cent offer due to only making the minimum repayments.”

The longest deals may also be unavailable to borrowers with weaker credit histories. Trevethick says: “If you're already struggling to meet repayments, moving debt to another credit product may simply delay the problem rather than solve it.”

So, savings or credit-card debt?

If your card is charging interest and you have savings beyond the emergency cash you genuinely need, the financial case for using some of that money to reduce the debt is strong.

If clearing the card would leave you with no buffer at all, a compromise may be safer: retain enough cash to deal with an immediate setback, put a lump sum towards the card and concentrate spare monthly income on clearing what remains.

A suitable 0 per cent balance-transfer deal can buy more time, but only when there is a realistic plan to repay the debt before the offer expires.

With savings rates in the low single digits and many credit cards charging many times more, holding large amounts of cash while paying high interest on borrowing can be an expensive way to feel financially secure.

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