No, not all of them.
Chances are, your coworkers are idiots, too. I might even be talking about your friends and family. Or about you. Yes, you.
I’m not talking about the regular stuff that frustrates you about your colleagues. Not even the mystery people who constantly leave their dirty dishes in the sink, or explode things all over the microwave, or walk away from the printer when it runs out of paper.
This is primarily a money site, after all.
I’m talking about the people with credit card debt. The people with credit card debt who earn a good living. The people with credit card debt who have access to other, better credit.
Repeat after me: “Credit can be good. Expensive credit is bad.”
Credit can be good, very good. We’ll talk about that another time.
Expensive credit is bad, very bad. In almost all cases, credit card debt is expensive credit and therefore very bad. Sometimes, you can get excellent rates on credit cards and it makes sense to make use of that. An example would be the Home Depot card I had once upon a time. It had no fees and was 0% for one year. They ding you BADLY if you don’t have it paid off by the end of the year, but as long as you do, you get the time value of the money all to yourself. That’s a big win.
I know that some of my coworkers keep balances on their credit cards. Not huge ones, but a few thousand dollars, say around $3000. Let’s say that it is at 20% interest, which is higher than some, but lower than many cards out there . To carry this balance for a month is costing them $50 in interest. Assuming they roll charges over, so that the principle amount is staying right around $3000 every single month, that’s $600 per year in interest. Bad move.
An Alternative Scenario
Your coworker doesn’t have the funds to pay off their card (despite having the income to do so, they are terrible with their money). However, the reasonable income and not-terrible credit rating means they can go to the bank and get a line of credit (LOC), for prime plus a few percent. Let’s assume it’s not a fantastic rate, so we’ll call it 8%. That’s a savings of 12%, or $30 per month. Taking the time to pay off the credit card via a few clicks online means a savings of $30. Let’s say, worst case scenario, it takes 10 minutes to turn on the computer, find your login number and move the funds around.
You’d be earning $180 an hour.
No, that’s not a sustainable hourly rate, but who wouldn’t want to get a small piece of that? Especially when you have debt hanging around.
There are potential downfalls to this plan, though. Different LOCs have different repayment terms, some only have interest-only payments. If you got yourself into a revolving credit card debt problem, you want a decently large minimum payment, so that you are making use of your $30 savings and putting it toward the principle. Just because you can “pay off” your credit card by transferring it to the LOC does not mean that you can turn around and use your credit card to incur more debt!
All you are doing, functionally, is getting yourself a consolidation loan, all on your own, and being a better steward of your money, to break the bad habit of carrying credit card debt.
I know that my coworkers are idiots, especially as I have a rough idea of their salaries. Have you witnessed the same thing? Are you guilty of the same thing?
To this day I can’t understand how people carry balances on their credit cards if they have the means (job) to not. Mind boggled.
Do any of your co-workers know about your site?? 😛
Kapitalust recently posted…How to Avoid Great White Sharks
Isn’t it insane?!
Haha, the coworkers who do know about this site aren’t those particular folks! And if they are, well… I can pretend it’s other people?
Yes my co-workers are the same! And so are some of my friends. The problem is that it is “normal” to carry around credit card debt nowadays. But what’s the point of carrying around credit card debt at 20% interest and contributing to your 401k which will probably get you a 6-8% return. Why don’t people understand it’s all about the rate of return??! Great post.
Syed recently posted…Credit Card Churning and a Free Credit Score
I know… it’s not even complicated math at all! I don’t understand how so many people don’t get it.
I feel like your article is pertaining to me. Did you really do this for me? Just joking. That being said, it really is an eye opener!
Jayson @ Monster Piggy Bank recently posted…How I Accidentally Learned to Invest Like Warren Buffett
I hope your co-workers don’t see this 🙂
You’re absolutely right about the audacity of the situation some people let themselves get into with credit cards. I feel like there should be some kind of exam or test you have to take on how to handle credit cards responsibly before you actually qualify to have one.
MMD recently posted…Â Niche Website Update 23 â $1,052 Income â Finally Growth for My Amazon Site
Ah! If only there was!
I could handle it if they read this… it would be a good open door to the conversation, haha.
Anne recently posted…My Coworkers are Idiots
Hahaha, I feel like this post was written to the “me” of a few months ago, when you kept telling me “calculate your hourly wage from a few calls/clicks”. But you’re right, it’s worth the effort.
The trouble I always found is that it sometimes feels like you’re not making progress when you’re switching stuff around. It feels complicated, even if it’s simple. It’s the emotions of “ugh, I effed up this badly in the past that I’m STILL dealing with this? Okay, I’ll just let it ride.”
Smart? No. Human? Yes.
Alicia recently posted…Fear of my Credit Score
Yes… oh the humanity, haha. It’s those pesky details that frequently get in the way.
Anne recently posted…My Coworkers are Idiots
While it’s not quite what you’re talking about in this post, this reminded me a lot of an old coworker of mine who was an idiot with money. She supported 2 kids and her disabled husband, working a full time day-job, and midnights somewhere else. I had a pretty good idea of what her income was, so I was shocked that she would work SO HARD to earn money, but was an idiot when it came to spending it. She smoked, she went to Tim Horton’s for coffee 2 or 3 times a day, she always went out for lunch… and then one day she shows up to work in a brand new Jeep. I don’t know all the details of her financial situation, but I knew enough to know that she couldn’t afford a new vehicle. If she budgeted her money better, there is no reason she needed to work 80-90 hours a week!
Amanda @ My Life, I Guess recently posted…A Day in the (Unemployed) Life
Oh my gosh! That’s ridiculous and awful. That sounds like some people we know who literally say, “we’ll never be able to afford to retire.” They have TWO vacation places and a trailer. It’s really, really simple to figure out why not.
Anne recently posted…My Coworkers are Idiots
I remember at the last company I worked for before going the SE route, there was one co-worker who complained she had thousands on a credit card. Some of us probed a bit and found out her interest rate was something like 18%. We told her to find a cheaper source of credit at least if she wouldn’t pay it down (she and her husband combined made six figures yet chose to live the good life on plastic). I don’t know if she ever took us up on the nugget of advice.
Kassandra recently posted…The School Of Failure
I hope she did… at the very least you were able to tell her that she had that option.
Anne recently posted…My Coworkers are Idiots
Each staff meeting I have a “life lesson” about saving PTO, saving money, just some general life advice as someone who has been in your spot and wished I could have done things slightly different. Know what that has done? Absolutely nothing. My most commonly requested day off from my staff is coming up this month on Black Friday. Many of them will spend 1-2 months salary on a single day and continue the debt trend. We are getting a pretty good bonus at the end of this week and I’ve heard no conversation about saving or paying off debt…just buying new phones, new laptop, etc. I won’t give up on people, one day people understand, but hopefully it will be before their financial life crashes down and forces them to change.
Lance @ HWI recently posted…Money Advice From the Future: “What Are You Waiting For?”
Yikes! Hopefully the repeated lessons will eventually sink in. Good for you for trying, and for not giving up despite feeling like you’re talking to a brick wall.
Anne recently posted…My Coworkers are Idiots
Yes, there are a lot of idiots out there! And it’s hard to just preach them about it.
How To Save Money recently posted…Save Money on Childcare
Yes… trying to guide the conversations without coming off as a total jerk is really difficult.
Anne recently posted…My Coworkers are Idiots