What You Weren’t Told About Credit Card Debt

“The man who never has money enough to pay his debts has too much of something else.” –– James Lendall Basford.

We all know that credit card debt sucks. We all know that we get charged interest when we miss our credit card payments. We know that even the perfect credit card can hurt us when not used properly.

There’s just something that we weren’t told about credit card debt. What is this?

Credit card debt is more emotional than logical. Nobody plans on getting into credit card debt when they fill out their forms. We just don’t think about it and somehow end up owing money.

I wanted to start off by sharing a reader question that I responded to the other day. I love to respond to reader emails because I believe in building a legacy and helping out as many people as one dude possibly can. Long time reader Kellee wrote in:

I am proud to say I have zero credit card debt, but I’m not sure when the best time is to pay my bill. I don’t like to procrastinate, so if my bill is due on the 10th, I’ll pay on the 7th to get it off my mind and make sure the payment clears (without any after 5 or business hours nonsense). Although, I’m not being charged any late payments, will I be charged the interest rate on the charges between the 7th and 10th? Is the true due date the best time to pay? I don’t like auto-payment, because I always like to check my statements myself for errors before I pay. Any help would be appreciated!

I love questions like this because it’s a perfectly logical question to ask. Kellee is clearly making intelligent choices and on the right track to financial success in her 20s. What’s the answer to her question? I suggested that she pay the debt off ASAP. The stress of owing money is just not worth it. If you have the money ready to pay off your credit card balance then I suggest you do it ASAP. Get that debt off your shoulder and move on with your life.

Now don’t get me wrong, I’ve used debt as leverage many times in the past for investment opportunities (another topic for another day). For most of us the reality is that debt will only hurt us. I suggest that you get rid of your debt ASAP.

Credit card debt is more psychological than it is logical.

Too often do college courses, personal finance books, and so-called “experts” throw out logical advice that’s supposed to help us solve our problems. We don’t think rationally when we get into debt. We don’t plan on using money that we can’t pay back. If we all behaved logically with our money than there would be no need for personal finance blogs.

Now allow me to get off-topic a little bit…

I’ve been training at the gym ever since I can remember. Conventional wisdom tells us that all junk food is bad and that we should never fast good. The reality is that everyone eating this has consumed some sort of junk food in the last week or so. Instead of feeling guilty over it we can do something else.

We can work with our weaknesses. I love junk food. Most bodybuilding sites suggest that you cut it out. Whenever I ate junk food I ended up feeling guilty over it.

Then I found the 4-Hour Body and a new solution to eating junk food. Tim Ferriss suggests that we have a one day junk food eating marathon on a weekly basis. This is done so that you strategically fill your craving of fast food without expanding your waist line. Last Friday as I do once per week I went wild. I had a McChicken combo with a strawberry milkshake, pizza for dinner, some shots of vodka, and a burrito in the middle of the night. I woke up cursing junk food and swore that I would never eat it again. Of course, the same thing is going to happen this Friday.

When it comes down to it, we all know what we should be doing. How many of us are actually doing it? This applies to spending as well. We can’t cut all of our spending at once. We can’t always save money. There’s nothing wrong with going on a shopping spree or buying expensive crap you don’t need. The problem comes when we don’t plan for it. If you work with your weaknesses and plan to make mistakes then you won’t feel guilty over it.

Before we look at the topic of tackling debt, I wanted to share a few interesting quotes that I found while doing research for my upcoming guide on completely crushing credit.

Ramit Sethi put it best on the psychology of debt and over-spending:

Anyone who believes people overeat and overspend simply because of a lack of willpower is simplistically ignoring decades of research so they can ideologically mislead themselves.

Adam Baker on paying down debt:

With no debt, your financial life will be the proverbial blank slate. Life will be yours to build, create, and live as intentionally and as passionately as you desire.

There are two popular strategies for paying down debt (as covered in my upcoming manual, Completely Conquer Credit in your 20s, end cheap plug):

The debt snowball.

This is the Dave Ramsey special. If you use this strategy to pay down credit card debt you make the minimum payment on all of your balances. Then you take your extra money and put it towards the credit card debt with the smallest balance. The goal here is to get a quick win and build momentum by paying off a credit card balance and seeing the direct results of your effort.

This approach to killing debt is very emotional. You use your emotions to your advantage. You get in the zone and start getting in pure “kill-debt” mode.

The high-interest-first approach.

This is the more logical/mathematically correct option. You make the minimum payment on all of your balances and then you put all extra money towards the debt with the highest interest rate. In theory this is the option that makes the most sense because you’ll knock off your highest interest debt first, saving yourself lots of money on interest in the long run.

The assumption here is that you’re a person that always makes the “logical” choices and does what is right. I have news for you: getting into credit card debt is not a logical process.

Simply put, none of us are told that credit card debt is more emotional than it is logical. When did you learn this?


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