Does Credit Card Debt Matter?

Posted by: Sophie H. | Dec 13,2007


I have talked to a fair number of people about their retirement concerns – especially since I’ve started writing this blog.  They say to me that they’ve read that paying off credit card debt is more important than investing or even saving.  Why, more than one person has asked me, if my credit card bill stays the same every month?  Can't we just leave it alone? 

Here’s how my friend Diane looks at the problem.  She has a $14,000 debt on a high 20% APR card.  Her credit’s not great either.  Hardly the best position to be in.  The way she looks at it is her credit card debt is around $350 every month for the minimum.  As she’s not really in the market for a new home or a new car – those days are long behind her – her credit rating doesn’t matter as much.  So while she doesn’t have a lot of space left on her credit card, she’s not entirely worried about her rating or getting out of debt.  

If she spends the minimum on her cards plus maybe an extra $25-$50 a bill, she has enough money left over for a decent enough quality of life and to even have some savings left over.  The “pride” of being out of debt doesn’t mean that much to her.  She’s resigned to basically shelling out $350 a month for the rest of her days.  

I was aghast when she told me this.  My answer to her is pretty simple: getting out of debt isn’t just a matter of pride, or even improved credit, but one of safety.  You never know when you’re going to need that available credit.  Saying you haven’t needed it thus far is like saying you don’t need your seatbelt because you’ve never been in an accident.  Most retirees who face increasing debt problems have had to use their credit cards for emergencies, such as medical bills.

Furthermore, if you’re more aggressive with debt payment, the more you’ll be able to save.  When I asked if there are some things she’d like that she cannot afford, she conceded that, yes, that was true.  Really, her whole monologue was a way to rationalize bad behavior.  So while you can potentially get away with not paying off your high-APR credit card balance, it is in no way advisable.  

Sponsored Resources Ads by Google