Let's talk about credit card debt

with actual nuance and without the lens of morality

Last weekend, pulling out of our Airbnb at 7 am, heading to my sister's graduation at 9 am, the sidewall of my tire blew out. Thankfully, due to my car seat ninja skills and the fact that we were staying with my whole family, we made it to graduation. To top it off, my lovely sister put my spare on for me the next day while I was dying of allergies and chasing toddlers.

I've had the same tires on my car since I bought it, so after rolling up to the nearest Discount Tire Monday morning, I was ready to replace all four (given that my car is AWD). I was also mentally prepared to put the cost on a credit card without intending to pay it off in full at the end of the month.

Balloons at graduation are such a fun tradition.

You’ve heard it before, and I’ve said it before: Use a credit card like a debit card. Credit cards are tools that give you more security, flexibility, and perks, but can be a double-edged sword. Yet, here I am saying I won’t pay my credit card in full come next month.

On the surface, this comes across as a bit hypocritical, but underneath, there’s a lot more to it. In sharing my own story, I want to illustrate the nuance of both the mental and economic framework I am using. I want to interrogate the assumptions often held about credit, debt, and the choices people make. I want to situate debt into a broader financial plan.

Do you have a story to share? I would love to start highlighting other stories about financial decision-making.

I want to preface this by saying that I am not telling you not to pay off your credit card or to take on more debt. In general, those are great things to avoid. But 'in general' doesn't account for our unique situation or plan (nor does it yours). It doesn't know that we opened a 0% APR card, meaning we won't pay interest for 21 months by just paying the minimum payment. It doesn't know that by the time we have to pay off the card, our income will almost certainly have tripled (yay, medical residency). It doesn't know that we don't have other debts and have chosen this to keep long-term investments intact.

And even though our exact situation doesn't apply to most people, parts of it are becoming more common. ‘More people, no matter where they live or how much they make, are struggling to pay their credit cards on time.’ There are many reasons - stagnant wages, inflation, tariffs, consumerism, etc. If you are turning to debt - especially credit card debt - as part of your financial plan, your reasons are likely different than mine, but the frameworks and tools are the same.

The tools

• Mental framework - aka attitude - Debt is bad, especially credit card debt. Right? That’s how some very loud voices in the personal finance world present it. But debt is not moral. It’s not good or bad. You might feel like it is and not want to use debt in your financial plan, and that’s completely acceptable. It’s also acceptable that someone else might want or need to use debt in their financial plan.

  Navigating choices around debt responsibly means understanding what debt means to you and why it may or may not be a good choice for you. This starts with asking why you are looking to use or have used debt (especially credit card debt). Is this a temporary situation, or are there bigger disconnects between your income and spending that we need to figure out?

• Economic framework - You don’t want to shoot your future self in the foot; you also don’t want to deprive your current self of life just because all your money is tied up in human capital. Understanding your sustainable level of spending across your lifetime makes for solid ground to stand on when deciding if and how much to borrow, spend, and save. Only then can you really fit debt into your financial plan and plan how and when you will pay it off.

  If your past self shot your current self in the foot, there’s no time like the present to make a plan to heal it. My favorite tool for this is PowerPay. It’s a free tool that calculates how long it will take to pay off debt, gives you different strategies for paying off debt, and calculates their impact. Alongside the math, you have to ask yourself what tradeoffs you want to make. Do you want to pay more toward debt and have less to spend right now, but more to spend in the long run? Or do you want/need to pay less toward debt right now so that you have more spending power now, knowing that it limits your future spending?

• Debt instruments - the type of debt you choose, even which credit card, can make a big difference in your experience and the debt’s impact. Have medical debt? Many hospitals will negotiate a 0% interest payment plan, which won’t be included in your credit score. Want to buy a car? Technically, you could buy a car with a credit card (I used one for the down payment on my last car, but paid it right off), but if you don’t plan on paying it off right away, a vehicle loan or potentially a personal loan will likely offer a much better rate.

  When choosing a credit card, choose the right one for the job. Are you planning to pay it off in full each month? If so, the interest (APR) isn’t a factor, but the annual fee might be. If you’re not planning to pay it off in full each month, look closely at the APR and fine print of promotional interest rates. What is your timeline, and do the fees and promotions align with it? What are your goals with this credit card? Find a card that fits your timeline and goals.

If you want help with debt decisions, I’m here for you! We can spin up your personalized economic framework and work together to find debt instruments that fit your needs.