When do you consider a credit card charge to be debt?

[disneysteve]

This question arose from a conversation in another thread.

If you go out today and charge $100 to your Visa, do you then consider yourself to have credit card debt until the bill is paid? Of do you not count it as debt if you will be paying it off in full when the bill comes?

Personally, I never think of credit card charges as debt as long as they are paid in full each month when the bill comes. I don't count it as debt unless you are carrying the balance over from month to month.

I suppose that technically, it is debt because it is money that you owe, but I don't think most people count it as such when talking about how much debt they have.

[AJ444]

I consider it debt when the entire balance isn't paid on the due date and interest starts to accrue.

For planning purposes I have my CC and Checking account combined so when I make a CC purchase it is immediately deducted from my overall balance.

[kork13]

In my mind, it becomes a debt when I start getting charged interest. In other words, when I know that I'm paying it off at the end of the month I don't consider it to be a debt... perhaps more of a "delayed expense."

[Fishindude77]

Until you pay the bill it is borrowed money, debt.

[corn18]

By definition, I guess it is a debt, but I don't consider it a debt if I plan to pay it off. I pay my card 2-3 times a month, so I don't consider that debt at all. It is carried as an expense in my spreadsheet but netted out against a category.

[PeggyHefferon]

This is an interesting topic. I personally do not view it as debt if I plan to pay it off in full when the bill arrives.

Some reference until accruing interest, but what if you make the purchase with a 0% credit card? In my mind, in that scenario it would be considered debt if you only pay the minimum and let the balance sit at 0%.

When interest rates were much higher, I would do that probably once or twice a year. Let the balance sit and keep the money in savings earning interest.

[Singuy]

Yes it's a debt to the credit card company. A debt is money borrowed in which you agree to pay it back later (with or without interest). That's exactly what you are doing when you make a purchase today and paying it off in full tomorrow.

But as long as you have enough liquid asset to pay off the card in full anytime, you are not in debt. It's a called an investment strategy until your liabilities exceed this liquid asset.

[disneysteve]

Yes it's a debt to the credit card company. A debt is money borrowed in which you agree to pay it back later (with or without interest). That's exactly what you are doing when you make a purchase today and paying it off in full tomorrow.

So to follow with that thought, what about services that you don't pay for until after you've used them? Are we in debt to the utility company because we are using gas and electric that we won't pay for until next month when the bill comes?

Personally, I think as long as you are current in all of your obligations, you aren't "in debt". That doesn't mean you don't have any outstanding bills.

[PeggyHefferon]

So to follow with that thought, what about services that you don't pay for until after you've used them? Are we in debt to the utility company because we are using gas and electric that we won't pay for until next month when the bill comes?

Personally, I think as long as you are current in all of your obligations, you aren't "in debt". That doesn't mean you don't have any outstanding bills.

I imagine it all boils down to the fine print.

But I agree that as long as my bill is paid prior to the due date, I do not view myself as having debt.

[bjl584]

I pay off my card in full every month. I'm using the debt to earn cash back. I'm not paying interest on the debt, so I don't consider it debt at all. It's actually an investment. I'm using leverage to earn a return.

[msomnipotent]

This is surprising to me. I assumed everyone would count it as a debt as soon as the card is used, because that is what I do and I am always right. I pay mine cards off every month, too.

[disneysteve]

I pay off my card in full every month. I'm using the debt to earn cash back. I'm not paying interest on the debt, so I don't consider it debt at all. It's actually an investment. I'm using leverage to earn a return.

Great point. It's hard to count it as debt if I'm making a profit on the transaction.

Most reward cards pay at least 1% so if we charge $3,000 per month, we earn $30 back. And on the purchases that we get 5% back from, we do even better.

[Fishindude77]

I don't know how you CAN NOT consider use of a credit card taking on debt?
You are using someone else's money to acquire something that you don't want to pay for right now, and you have agreed that you will pay them back later. The terms in regards to interest, rewards, etc. have no bearing on this.

Debt is debt, you owe the money soon as you make the transaction. Start using cash or write checks for these purchases if you can't stomach the idea that using a credit card is taking on debt.

A credit card is the ultimate "American dream tool". Get stuff now, pay for it later. Truth be told, must of us are just about always carrying some debt.

[bjl584]

I don't know how you CAN NOT consider use of a credit card taking on debt?
You are using someone else's money to acquire something that you don't want to pay for right now, and you have agreed that you will pay them back later. The terms in regards to interest, rewards, etc. have no bearing on this.

Debt is debt, you owe the money soon as you make the transaction. Start using cash or write checks for these purchases if you can't stomach the idea that using a credit card is taking on debt.

A credit card is the ultimate "American dream tool". Get stuff now, pay for it later. Truth be told, must of us are just about always carrying some debt.

Debt is only debt when you have to service the debt via interest payments. If you pay off the bill before interest kicks in, and you can make a profit on the debt via cash back rewards, then that is an investment.

[Fishindude77]

Debt is only debt when you have to service the debt via interest payments. If you pay off the bill before interest kicks in, and you can make a profit on the debt via cash back rewards, then that is an investment.

Not true.
Borrow money from your rich uncle with no discussion of any type of interest or charges and it's still DEBT / Money owed to him. Same deal, doesn't matter if you turned a profit with it.