I came across a recent poll from Mint.com that asked people their thoughts on how much credit card debt is too much.
As interesting as this question may seem, I think there are deeper layers to that. The extreme school of ‘Any debt is bad’, is one side. I tend to lean a little more moderately in this respect. After spending a little over 3 years clearing out our debt, I am certainly not looking to keep balances on our cards. We currently use 2 cards.
One for Personal and one for BusinessSorry for the infographic scrolling..
I sometimes have to travel for my work. That involves the airline tickets, hotel, food, fuel, etc. My company is very good at re-imbursing expenses and I typically get reimbursed within 2 weeks. I use a single card, with Expensify to capture my receipts and then have the expenses sent to a ING Direct account specifically for my business expenses. Completely separate from Personal expenses. The card I use for this is a rewards-based card. No annual fee and we use the rewards to ‘buy’ a gift-card we use for other stuff.
We pay our card off every month. Every month. Large & Small purchases go on the card. Groceries, fuel, etc. Each week a Quicken report is run showing us what we’ve spent on the Personal card and we write the check out. Many times, our check going out is larger than what the card shows, because the charge hadn’t been posted to the card ! If others have this capability (discipline and financial means) then I think Mint’s questions would be a little more revealing.
What would I have asked?
I would have wanted to have asked “How much is too much credit card balance being carried from month-to-month?” As I said, we pay it off every month. We had to purchase a $1,500 garage door and a $700 new freezer, with our Rewards Card. The check had cleared our account before the charges posted.
It would also have been interesting to know what the percentages of debt to their income. For instance, if I had a balance on my card of $5,000 and have an annual income of $50,000/year, that’d be 10% of my income in card debt. If I only had $500 in debt, it’d be 1% (keeping these number simple for me.. not my readers)
The ratio matters.
There’s no doubt that the past few years have affected the American perception of the use of Credit Cards and the Mint poll is a nice summary. Strive to get your debts under control, spend less than you earn and make sure you talk to your spouse/partner on how to work together in keeping the household finances under control.