Poll: Are current credit card charges debt?

[MichaelB]

It seems to be an unsettled question over at this poll, so I thought it might make a reasonable new poll question.

So, if you pay your credit card balance each month in full, is the current, not yet paid and not yet due balance considered debt?

 

[growing_older]

Yes. You owe this money and must pay it back in the future.

 

[Texas Proud]

Well, since this is related to a net worth question, then yes....


So, say you have $10,000 cash and $2,000 CC debt.... if someone asked you your net worth, if you ignored the CC debt then you would say $10,000...


However, we all know that the net worth is only $8,000.....


You can either list it as debt or reduce your 'cash' for the payment that you will have to make within the next month... any other way and you are fooling yourself...

BTW, I have $7K of CC debt right now.. ... DW has been booking trips etc. and it is way out of hand....

 

[DrRoy]

I would say yes, but only for up to 30 days.

 

[Meadbh]

Yes, of course, they are unsecured debt.

https://en.m.wikipedia.org/wiki/Credit_card_debt

"Debt results when a client of a credit card company purchases an item or service through the card system."

What the heck else would they be?

 

[Car-Guy]

So, if you pay your credit card balance each month in full, is the current, not yet paid and not yet due balance considered debt?

Technically yes, but in practice "no" if paid in full each month with no carrying/finance charges. If it is debt, to me everyone would have debt. Example, my monthly electric and water bills are based on usage playable only "after" I use it. Is that debt? Technically yes, but not really for practical purposes.

 

[braumeister]

Splitting hairs, but the way I look at it is that I don't actually "owe" the money to the CC until the due date. Since I pay it off by that date (if not a little before), then I not only don't owe the money, but in most cases I'll be rewarded for using the card.

I know that technically that's incorrect, but I can't help seeing it that way.

 

[ShokWaveRider]

ONLY if you hold a balance, we do not, so No.

 

[MichaelB]

Splitting hairs, but the way I look at it is that I don't actually "owe" the money to the CC until the due date. Since I pay it off by that date (if not a little before), then I not only don't owe the money, but in most cases I'll be rewarded for using the card.

I know that technically that's incorrect, but I can't help seeing it that way.

GMTA. This is my view as well. The way we use it in our discussions here, credit cards are used even when we have the cash because we get some of the money back, it makes for easier and more complete record keeping, and gives us some consumer protections that we otherwise might not have.

So, I have a credit card balance that effectively is a debit card balance and the CC company chooses to debit once a month at a predetermined date rather than when I incur the charge.

 

[Nemo2]

Splitting hairs, but the way I look at it is that I don't actually "owe" the money to the CC until the due date. Since I pay it off by that date (if not a little before), then I not only don't owe the money, but in most cases I'll be rewarded for using the card.

I know that technically that's incorrect, but I can't help seeing it that way.

Technically yes, but in practice "no" if paid in full each month with no carrying charges.

This is how we view it......otherwise anyone who uses a credit card for a purchase, and doesn't simultaneously remit the funds to the credit card company, has 'debt'...even before said debt is officially posted.

 

[Meadbh]

This is how we view it......otherwise anyone who uses a credit card for a purchase, and doesn't simultaneously remit the funds to the credit card company, has 'debt'...even before said debt is officially posted.

Well, you do have debt once you have used the credit card to purchase something. If you die, your executor's first job wil be to pay off your debts, including your current credit card debt.

 

[Sunset]

I voted no, because I could return the item and get a credit in the very same statement.
Also because I carry so little CC charges, since I pay my CC off every 2 weeks, that it's an insignificant amount.
Whenever I have used my CC on a big purchase, I pay it off within days after it shows on the CC.

Why do I pay off my CC so much ?
Because then when I look at my bank balance, I know pretty much all that $ is mine.

 

[mpeirce]

Lemme get this straight.

I pay for your dinner and you promise to pay me back for it in 30 days. And you think you are not indebted to me?

It's debt. Not bad debt, but debt none the less.

 

[Cobra9777]

No need to break out the accounting textbooks. I think most would agree that any unpaid CC balance is technically a debt that must be repaid. But when it's paid off in full every month, with no interest charges, and usually a cash back credit or some other reward, this is hardly "debt" in the usual sense, or in context of the prior poll (at least that's my interpretation of the intent of the prior poll). More importantly, the lowest level answer for that poll was "<10%" of total assets. My average unpaid CC balance is 0.14%. I would think others who just use CCs for cash back rewards, would be similarly low. So answering "<10%" would be grossly misleading IMHO. I answered that poll, "no debt" and this one "no."

 

[Nemo2]

Well, you do have debt once you have used the credit card to purchase something. If you die, your executor's first job wil be to pay off your debts, including your current credit card debt.

Which is why I specified simultaneously.......i.e. if you make a $50 CC purchase, you'd have to, in the same microsecond, transfer an equal amount to your CC account.

 

[Nemo2]

Theologians and Engineers might be killing each other over this question, even as we speak.


BTW, what is the definition of 'current' in this context? (I tried calling Bill Clinton...but to no avail.)

 

[Aerides]

No. - current charges, ones which one plans to pay before their due date with no carry-balance, no interest, should not be considered "debt" for the purposes of determining ones total indebtedness.

I could and would pay cash and/or debit card for these expenses, and would if there were interest on day 1 or any of the other implications of debt. I choose to use the credit card for convenience, points, cash back, etc. I'm not using credit for the purpose of debt or delaying payment, but for the perks only.

If you want to get technical, sure, it's debt, but i answered zero on the debt to assets ratio based on what I consider debt and not, as above.

 

[Meadbh]

More importantly, the lowest level answer for that poll was "<10%" of total assets.

Actually, the lowest level answer was:

I have no debt whatsoever, not even a credit card bill.

 

[Meadbh]

BTW, what is the definition of 'current' in this context?

Payable within one year.

 

[razztazz]

I don't consider anything I can pay off instantly a debt. I use credit cards only because they are easy not because I don't have the money and "need credit".

Didn't see it mentioned earlier but the rest of the work considers it debt. I went for a mortgage once ... 1998 I think... filled out papers. Asked if I had any current debt. I check "no". Then they noticed the $19.99 dial-up internet modem monthly charge on one of my cards They had a problem with A) the debt and B) the fact that I seemed to lie about it even tho they all knew exactly what it was because they all did the same thing themselves. That's how we used to pay for internet in the stone age. Loan rules had not changed to match the technology. I don't know if they have today.

 

[rodi]

Hmmm... I consider it debt. There may not be interest associated with it since you pay it off at the end of the billing period - but it's debt.

I think the polls talked about "investable assets" rather than net worth... My credit card debt and my cash accounts (checking/savings) are not included in my investible assets but are included in my net worth.

I'm taking an accounting class right now and it's pretty clear what the official way to do it is... Accounts payable (credit cards included) are a liability. That liability goes to zero when you pay it in full, but your cash balance also takes a hit.

 

[Meadbh]

Hmmm... I consider it debt. There may not be interest associated with it since you pay it off at the end of the billing period - but it's debt.

I think the polls talked about "investable assets" rather than net worth... My credit card debt and my cash accounts (checking/savings) are not included in my investible assets but are included in my net worth.

I'm taking an accounting class right now and it's pretty clear what the official way to do it is... Accounts payable (credit cards included) are a liability. That liability goes to zero when you pay it in full, but your cash balance also takes a hit.

Thank you rodi. Finally someone who gets it!

 

[Nemo2]

The poll could be modified to reflect outstanding debt.......although someone, (probably me), would say "That's not outstanding, it's quite normal".

 

[Danmar]

It is technically debt of course. But if you pay it off every month, it's more like a payment mechanism. If significant and you are calculating your net worth, you should include. Having said that, I certainly consider myself debt free because this is my only debt and I always have the cash to pay it in full. Having a few thousand dollars in current CC charges that will be paid by the due date, does not (in my view) mean you are "in debt". If you were nobody would ever be debt free. Must be a slow day?

 

[Dreamer]

If I go to a store to obtain something, then I must either pay cash for it, promise to pay for it later (credit) or steal it. If I promise to pay for it later (credit) and don't, then I am going to be in trouble. I do consider it credit. However, I don't worry about it, because I pay off our credit cards in full each month. Sometimes, I pay for purchases ahead of time. We just took a trip to Canada and Maine and we owed less than $2000.00 on Discover and I paid $5000.00 to have some leeway. Our 6 day schooner trip was already paid in full. We came home for 3 days and left for NC and again I paid ahead some. I like the credit card rewards too!