A co-worker made that remark to me, and I was floored by the casual nature of it. He was describing his credit card and how he pays some fee and only pays 5% interest on the balances, and he seemed quite proud of this choice (he was then upset by another co-worker who pointed out he had a free card that he only paid 5% on, but that is for another story).
I commented about why the interest rate on a credit card was so important, since he surely paid off his balances, and yes he said he did that most of the time, but sometimes he would forget about it. I pushed forward and pointed out that if you only sometimes forget to pay your card off, you can get a forgiveness rebate for that time, but he was adamant that having a low-interest rate was a good thing for a credit card.
My comments made me sound like me saying that a 5% rate on a credit card is bad, and that wasn’t the point that I was trying to make, I think I am just a little too old school, because carrying a balance on your credit card just seems so foreign to me (although I did do that for about a year after I graduated from University (full disclosure, don’t want to portray myself as being lily white and without sin)). I can’t grasp carrying balances on credit cards, but I suppose this is just an accepted thing these days?
The other danger of course, which can be from credit cards, is then carrying large balances on your lines of credit, which now seem to be the next step down from Credit Card debt carriers. These folk have got lines of credit (secured or unsecured) where they hide their discretionary over-spending instead (again I think I am guilty as charged on that one).
Maybe what we need to do is just stop spending? Maybe I have it wrong here?
People can’t forget about an annual fee as that is a part of their interest. People need to focus on paying down credit card debt to avoid bankruptcy in the future, and I feel that the people who see 5% as a low interest rate aren’t as consistent with making full payments. The goal here should to be to pay down all debt, increase utilization, and use cash as much as possible.
Maybe your co-worker should read your blog more 🙂
I can’t imagine not paying off my CC debts every month. If I couldn’t, I wouldn’t own one.
I’m part of the pay it off every month club. I haven’t really researched low interest cards (laziness?)….but I thought they either had some weird strings attached, or had an annual fee. We just stick with the freebee cards….
The annual fee is a form of interest as well. Your friend seems indifferent to the interest. He is getting into bad habits that will come back and bite him later.
I think it’s just another strategy people use to justify poor habits. Rather than framing their situation as ‘I have bad debt’ they frame it as ‘I only pay 5% interest and that’s a lot better than 18% on most other cards’. Unfortunately it isn’t an approach that will get them ahead in life.
From your readers I doubt your perspective is “out there”, however, think just how many people don’t read PF material. I think about my group of pals and perhaps 1 of the 8 or so reads PF related material once or twice a month.
Carrying CC debt is “normal” for a lot of people out there and these aren’t the people who are likely the majority of our readership.