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Credit Card Debt Considered Bad Debt!

March 13, 2017
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It’s good to see you back here on the Secure Planning Strategies blog.  This week, I am going to be discussing the credit card debt and how it affects your ability to save for retirement. 

If there is any credit card debt on the personal books, it is wise to get rid of it by paying it off as soon as possible.  The items that you purchased on credit, might have been a great buy at the time if you paid cash for it.  Now, you carry a balance on a credit card for that same purchase and the original purchase all of a sudden doesn’t look so good because you are paying interest on the money you borrowed.  That means that you, the credit card holder, could wind up paying over three times the original purchase price. 

Another thing to consider is that having a balance on a credit card also lowers your credit score and the purchasing ability for future buying.  Let’s take a closer look at this because it sounds like a more complicated concept than it really is.  For example, you have a balance on a credit card, which the credit reporting agencies consider to be BAD debt and will increase your credit risk by lowering your credit score.  Now, let’s say you want to buy a car, or a home, but your credit score is lower and that lower score puts you in a higher interest rate to further borrow additional money.  The interest rate is higher so the payment is higher, which means that you will qualify for a lesser house or car.  In addition, the credit card payment has to be included in your debt-to-income ratio so that lowers your purchasing ability. 

In the end, credit card debt is considered bad debt and can get you into additional trouble and may increase your financial burden in ways you didn’t even initially consider.  The solution is to only use cards for emergencies and never purchase items on a credit card that you cannot afford to pay off every monthly cycle.  Do not use credit cards as an income to supplement your income to get you through until the end of the month cycle.

We, at Secure Planning Strategies, are here to see you succeed with your retirement dreams and provide a nonjudgmental atmosphere when it comes to paying off debt and future investing.  Please know that we are never more than a phone call away and we care about you and your situation.   If you don’t want to wait for the next week’s blog article and you want to get started today, please give us a call at: (248) 827-2580 or e-mail us at: info@spsfinancial.com.

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