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

[Singuy]

I don't think there is/was any question or confusion about a mortgage. It is clearly debt regardless of what someone believes the house to be worth.

Aren't you teaching finance courses?

Just want to be clear considering we are arguing how choice may affect our "in debt" status.

Person A with credit debt of 20k and doesn't have the ability to pay it off is "in debt".

Person B has a credit card debt of 20k with 100k sitting in the bank and CHOOSE not to pay it off today.

Is person B in debt?

Is the person who choose not to sell the house and be debt free like person B similar? When someone is "in debt" vs debt free, is it a matter of having a choice vs not having a choice?

Perhaps I am thinking way too much into this due to boredom..lol.

[MooseBucks]

Just want to be clear considering we are arguing how choice may affect our "in debt" status.

Person A with credit debt of 20k and doesn't have the ability to pay it off is "in debt".

Person B has a credit card debt of 20k with 100k sitting in the bank and CHOOSE not to pay it off today.

Is person B in debt?

Is the person who choose not to sell the house and be debt free like person B similar? When someone is "in debt" vs debt free, is it a matter of having a choice vs not having a choice?

Perhaps I am thinking way too much into this due to boredom..lol.

Debt vs debt free is not a matter of having a choice vs not having a choice. Plain and simple if you owe money you have debt. I think you are confusing having a negative net worth with having debt.

[Singuy]

Debt vs debt free is not a matter of having a choice vs not having a choice. Plain and simple if you owe money you have debt. I think you are confusing having a negative net worth with having debt.

I'm not confused. The debate about money owed not considered as debt(such as a credit card bill prior to pay off) is telling me that some people see debt as circumstantial when it really shouldn't be. "I pay my credit card off every month, I have the money to fully pay my bills, therefore this money owed is not considered debt"..well then that just opens up all sorts of debate of the true meaning of actual "debt"...including connecting it to net worth.

[Fishindude77]

A really accurate financial statement will have line items for credit card debt, taxes due, and other items in the liabilities section. If you typically spend $3000 per month on the card, this is where you show it.

There are very few of us who are truly walking around debt free. Most all of us owe some taxes, last months credit card spending, utilities, etc. These items are all DEBT.

[bjl584]

I think we are splitting hairs here.

My mortgage is a debt. So are my student loans.

My phone bill? My credit card that gets paid off every month? Maybe technically it's debt, but I don't consider it to be, and I don't feel that those "debts" are going to drastically alter my ability to have financial success. They are just the costs associated with being alive and living life as far as I'm concerned. Whether I break them down onto a spreadsheet or not isn't really going to matter.

[disneysteve]

A really accurate financial statement will have line items for credit card debt, taxes due, and other items in the liabilities section. If you typically spend $3000 per month on the card, this is where you show it.

There are very few of us who are truly walking around debt free. Most all of us owe some taxes, last months credit card spending, utilities, etc. These items are all DEBT.

So is there no difference between DEBT and LIABILITY?

Perhaps I'm wrong from an accounting standpoint but I've never thought of a regular monthly bill as being debt. Even here, when we all list our budgets, nobody ever puts their utility bill under Debt. They put it under Expenses. We don't put this month's Visa bill under Debt either, unless we are carrying a balance that is being paid off over time. It's semantics, for sure, but it's how I've always seen it expressed.

[PeggyHefferon]

So is there no difference between DEBT and LIABILITY?

Perhaps I'm wrong from an accounting standpoint but I've never thought of a regular monthly bill as being debt. Even here, when we all list our budgets, nobody ever puts their utility bill under Debt. They put it under Expenses. We don't put this month's Visa bill under Debt either, unless we are carrying a balance that is being paid off over time. It's semantics, for sure, but it's how I've always seen it expressed.

Even googling the topic results in different answers. One states expenses are their own form of liability in the Balance Sheet. Another states it is a line item on the Income Statement.

Personally I don't care what it is technically. I consider myself debt free.

[disneysteve]

Personally I don't care what it is technically. I consider myself debt free.

We're not there yet but once the mortgage is gone and the student loans are gone, we will also consider ourselves debt free no matter how much the monthly credit card bill is.

[~bs]

debt is a form of liability, and depending on what one's interpretation of debt is, can be less than or equal to total liability. Hence why I said it's better to simply use a few more words to make things clearer to the other party.

So is there no difference between DEBT and LIABILITY?

Perhaps I'm wrong from an accounting standpoint but I've never thought of a regular monthly bill as being debt. Even here, when we all list our budgets, nobody ever puts their utility bill under Debt. They put it under Expenses. We don't put this month's Visa bill under Debt either, unless we are carrying a balance that is being paid off over time. It's semantics, for sure, but it's how I've always seen it expressed.

Say it's the end of the month, and you needed to close your books. Assuming you're on the accrual basis (expenses reported when the expense occurred), you'd pick up those utilities, salaries, fringe costs, rent, whatever as both liability (debt) and as an expense. If you're trying to report as of a certain period of time, say the end of the year, and you don't pick it up, it's incorrect.

[disneysteve]

So I realized something when discussing this in the other thread.

We charge almost everything we can, so the items that appear on our monthly credit card bill are already itemized on our list of monthly expenses. Things like cell phone, land line, cable, internet, auto insurance, gas, food, alarm fee, etc. are already counted in our budget as expenses. The credit card bill does not represent an additional expense. All it represents is the method of payment for all of those other bills.

So if I'm doing a financial statement that lists all of those bills already, I wouldn't also list the outstanding credit card bill because then I'd be counting everything twice.

[Like2Plan]

I have to agree that it is a debt. Maybe it could be described as a long term liability (in the case of carrying over debt from one month to the next) vs a short term liability (PIF each month)?

[TexasHusker]

You can think of the debt any way you want. I think of it as a temporary gift from the merchant bank, but that I have to re-pay when the statement comes out. I feel sure that the merchant bank considers it a debt.

[scfr]

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?

Technically, yes. And my employer is in debt to me for the hours I've worked since my last paycheck that haven't been paid yet.

I think that the way things technically are and the common way of referring to them are very different. When someone says they are in credit card debt, we assume it to mean that they have to carry a balance. And I certainly wouldn't go around telling people that my employers owed me wages, because people would assume that meant they didn't pay me on time and that would be scandalous and untrue.

[disneysteve]

Technically, yes. And my employer is in debt to me for the hours I've worked since my last paycheck that haven't been paid yet.

I think that the way things technically are and the common way of referring to them are very different. When someone says they are in credit card debt, we assume it to mean that they have to carry a balance. And I certainly wouldn't go around telling people that my employers owed me wages, because people would assume that meant they didn't pay me on time and that would be scandalous and untrue.

That's a great analogy. Yes, I would never say my employer owed me money because most would assume that meant they were in arrears. In the same way, I would never say we have credit card debt, because that would imply that we are behind on payments which isn't true.

[commoncentsmike]

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.

Technically it's debt because you used funds that did not belong to you and you OWE, but I'm with you- as long as you pay in full each month and don't pay interest, its not really like most debts.