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?