This got me thinking with all the talk about AI replacing people is it something you would entertain to give you advice on a current financial decision? I decided to test it out as recently I was actually asked by a person whether or not he should or shouldn’t take money from his savings account pay off a credit card bill. I started by explaining about the nature of the scenario by writing the following:
“Someone has spent a lot of money using his credit card with the expectation that he was going to get a big bonus from work to pay it off. That money never came. So in your opinion is better to pay the minimum while waiting for the bonus money to arrive or simply take money out of his savings to pay off the bill?”
It’s initial reply was pretty long stating the following:
________________
I’m not a financial advisor, but I can offer some general considerations for this situation. Deciding whether to pay the minimum on the credit card or use savings to pay off the bill depends on several factors:
Interest Rate: Check the interest rate on the credit card. If the interest rate is high, continuing to pay only the minimum could lead to significant interest charges over time, making it more expensive in the long run.
Emergency Fund: Consider the individual’s financial situation and emergency fund. It’s generally recommended to have an emergency fund that covers three to six months’ worth of living expenses. If using savings to pay off the credit card jeopardizes the emergency fund, it might not be the best option.
Job Stability: Assess the job stability and the likelihood of receiving the expected bonus in the future. If the individual’s job is uncertain, it might be better to pay off the credit card using savings to avoid accumulating more debt.
Stress and Peace of Mind: Consider the psychological impact of carrying credit card debt. For some people, the stress of having debt can be overwhelming, and paying it off using savings could bring peace of mind.
Debt Repayment Strategy: If the individual has multiple debts, they may want to consider a debt repayment strategy, such as the snowball or avalanche method. Prioritizing high-interest debts first may be more cost-effective in the long term.
Negotiation: If the credit card debt is significant and the person is struggling to pay, they might consider negotiating with the credit card company for a lower interest rate or a payment plan.
It’s essential for the individual to carefully evaluate their financial situation, risk tolerance, and future prospects before making a decision. It might be helpful to consult with a certified financial advisor who can provide personalized advice based on the specific circumstances.
______________________
That’s kind of interesting how it needs to reemphasized that it is not a financial advisor. Would that mean in the future there will be “certified” AI bots for certain subject matters? I pressed it for an answer though and it stated this afterwards:
“If I have to give one answer, I would recommend using savings to pay off the credit card bill, especially if the interest rate on the credit card is high. This would help avoid accumulating more debt and potentially incurring significant interest charges over time. However, it’s crucial for the individual to carefully assess their financial situation and consider the factors mentioned earlier before making a decision. If unsure, consulting with a financial advisor can provide more personalized guidance.”
In general, it gave a similar answer to what most people would say, including me, as the interest rates on credit cards would probably eat up whatever interest you would get for having money in the savings. From this example it seems like it could be another opinion if anything if there is no one available.