The One Credit Card Debt I Don’t Pay in Full

Why this man favors flexibility over being debt-free.

I’m a major advocate for paying off all your credit cards in full every month. In fact, I pay mine when the statement comes in, rather than wait for the due date. That’s how serious I am about not having credit card debt.

But, there’s one card on which I carry a balance, even though I could pay it off tomorrow. It’s my only non-mortgage debt. What am I thinking? Let me tell you.

Click to read more about 5 debts you should tackle before you retire.

What Got Me into Debt

Last year, my air conditioner stopped working. It was 11 years old, not the best quality to begin with and would cost $500 to fix.

I considered whether it was worth it to put $500 into a unit I didn’t have much faith would be around for much longer. I decided I would feel better spending that money on a new air conditioner instead, and chose to replace the furnace at the same time.

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Grand total: $12,000

After weighing all the financing options — paying cash, putting it on an existing card and paying that off, or opening a new card — I opted to open a new card with the installer that offered 18 months at zero-percent interest. You see, while I loathe debt, I also like flexibility. Taking on a large monthly payment without getting stuck with interest would allow me to keep my emergency fund intact and adjust my spending to incorporate the cost over 18 months. I liked that option better than any cash-back or rewards benefits I would have gotten from another card.

Read: When You Should Use Your Emergency Fund

Things to Know About 0% Offers

You have to read the legal language carefully before jumping into these offers. For instance, most cards accrue delayed interest. If your balance isn’t paid in full by the final month of the offer, your account gets dinged for all the back interest you would have paid on any other card. That can be hundreds of dollars you weren’t expecting.

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Also, make sure you divide the total balance by the number of interest-free months to figure out what your payment should be, and then make that payment. The minimum payment is most likely not the amount you should be paying to avoid interest charges. My minimum required payment is $325, but I have to pay $675 every month to knock out the loan and avoid the accrued interest.

Finally, many cards have language that says you must make at least the minimum payment every month or they tack on a fee or convert to a standard card. Don’t think you can get a zero-interest card and hope to pay it all off in big chunks at the end.

More on Fine Print: The Worst Fees in America — and How to Avoid Them

Why I Carry the Debt

I know I am disciplined enough to make the payment every month. However, this gives me peace of mind that if I needed to make less than the $675 payment I have that flexibility, so long as I pay the difference on a future payment.

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Keeping my money available for other opportunities or expenses means I’m taking a free loan, so long as I’m careful. Considering what the air conditioner and furnace cost, I’m happy to get something for free.

Click to read more about 10 things you should never put on a credit card.

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About the Author

Scott Sherman

Scott Sherman is a financial coach and personal finance blogger who has written about the intersection of behavior and personal finance. His work has been featured in a variety of publications, and he coaches people across the United States on how to gain better control of their financial lives.

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