When You Have Credit Card Debt, You Can’t Afford Anything

When You Have Credit Card Debt, You Can't Afford Anything

Let’s talk about credit card debt for a second.

I know about credit card debt. It was my companion for over six years. At its peak, I owed more than $20,000 on a credit card. I ignored it for a long time (that’s how it stayed with me so long!) but once I got serious, it was time to break up with the credit card.

I paid off the credit card somewhere in 2012, and just kept trucking. In fact, I can more easily remember the feeling of paying off all my consumer debt than I can recall what it felt like to pay off my credit cards. A little less stupid, I think. But as Joe always says, paying off credit card debt is not a goal. It’s just the first step toward getting your stuff together and acting like an adult.

When You’re In Credit Card Debt, The Bank Owns You

After I got out of credit card debt, there was no going back. In fact, I remember thinking I couldn’t even give financial advice until I’d gotten myself out of credit card debt. Credit card debt is evil. That’s strong, sure, but true. If your finances are determined by how much you owe rather than how much you can save, you will never, I repeat, never, get ahead.

Anyone who tells you otherwise is lying, either to you, or at the very least, to themselves.

It’s interesting. I’ve seen several personal finance bloggers write about credit card debt lately. But not in the “credit card debt is evil and must be eradicated as soon as humanly possible” way. In the “I still carry credit card debt because I’m working on other financial goals” way. I know that personal finance is personal, and we’re in America, or Canada, where everyone gets to do what they want, but I am left scratching my head.

I honestly thought, “high-interest credit card debt” was the category of debt that fell firmly into the “Bad Debt” category. Because if there is such a thing as Bad Debt, it’s the kind that charges double-digit interest on things you’ve already bought. How is this not a universal thought?

What Paying Off a Credit Card is Like

If you have credit card debt, let’s play a game. How much is your interest? Mine, at the highest, was 25%. Once I called and got it negotiated (after three “transfers to my manager”) all the way down to 23% interest.

Would you invest in a fund that guaranteed a return of 10-15% (or whatever yours is — are they still 25%?)? I know the answer, because who wouldn’t want a guaranteed return of double digits?

Here’s the thing, though. There are no investments that can guarantee that kind of return.

No investments, that is, except your credit card.

See, by paying down your credit card, you’re essentially earning that interest because every month you pay over the minimum is a month of your life you get back at the end of the debt payoff process. So why not do it?

Here’s the thing. If you have credit card debt, absolutely every purchase you make is something you can’t afford. Buying something while in credit card debt is not always irresponsible, because even those of us in debt have to eat, but when you’re already in the negatives, you can’t afford anything. Not groceries. Not rent. Definitely not those shoes.

Paying Off Credit Card Debt is Step Zero

Don’t buy anything until you’ve proven to yourself that you can live in a world where you spend less than you earn. Don’t overextend yourself. You want take out? YOU CAN’T HAVE TAKEOUT. You want to buy a car? Forget it. You can’t afford it.

I’ve seen other people talk about buying a house while they still have credit card debt.

Don’t do that.

Get your financial house in order before buying a house.

Before aggressively paying down other loans.

Before building a huge emergency fund.

Before having a baby.

Before getting married.

Do You Still Have Credit Card Debt?

If so, why?