Demystifying Credit Card Debt

I personally feel that credit card and installment debt is misunderstood, cloaked in shame or discouraged across the financial wellness industry. In reality, these types of debt can be leveraged responsibly and effectively.

Challenging the Impulse Control Narrative

One common misconception about credit card debt is that it stems from poor impulse control. However, in my seven years of financial planning experience, I've rarely seen this to be the case. Most often, the reasons for accruing credit card debt are systemic rather than individual.

The primary reason I encounter for significant credit card debt, especially among young professionals or those who have recently relocated, is the rising cost of living. Salaries haven't kept pace with expenses in many areas, making it challenging for people to meet their daily needs without resorting to credit cards. It's not a matter of lack of effort; it's a matter of economic reality.

Many entry-level jobs are located in larger cities where the cost of living is high. This situation forces young professionals to use credit cards for essential expenses like housing, transportation, and work attire. It's an unfair burden to place on individuals who are simply trying to establish themselves in their careers.

Breaking the Debt Cycle

At Money Positive, we focus on helping individuals break the cycle of debt. This process often involves budgeting and building up an emergency fund before aggressively paying down credit card debt. It's crucial to stop the cycle of throwing all available funds at debt only to resort back to credit cards when cash runs short.

We employ methods like the debt waterfall technique, focusing on paying off one card at a time, starting with either the highest interest rate or the smallest balance. Additionally, we often recommend balance transfer credit cards with zero interest rates for a limited period or personal loans from credit unions to consolidate and reduce the interest burden. It's important to move away from the stigma and judgment often associated with credit card debt. The stereotypes of irresponsibility rarely match the reality of the situations we encounter. Instead, we need to understand and address the broader systemic issues that lead to such financial challenges.

If you're struggling with credit card debt and feel like it's holding you back, don't hesitate to reach out. We're here to assist you in finding a sustainable path forward.

This article is based on original advice shared in the Money Positive’s video Don't Get to F**k It: What the Debt Discourse Gets Wrong. It was written in blog format with the help of ChatGPT to expedite publishing on our website.