One of the first rules of good money management is to pay off that credit card debt, right? Well…usually yes. But there are sometimes when having that credit card debt can actually help you achieve other things with your finances, with the thought that any interest you pay in credit card debt is canceled out (and exceeded) by the greater good. You still need to be smart about managing your credit card debt if you choose to have some, but if handled in a smart way, it could actually be somewhat of a benefit to you.
I take the approach that all my bills and expenses are pretty much all lumped together and all that really matters is the bottom line. Sure, some debt affects your credit worse than others, but if you’re not planning to make any major purchases in the near future, that may or may not be a factor for you (for me right now it’s not). So basically, if the amount of interest I’m paying on my credit card debt is less than all the benefits I get for having that debt, then it makes sense to not pay it off just yet. Sometimes keeping credit card debt can be a hard thing to do, since I like to see the $0.00 balance on my credit card statement every month, but I treat it as just another part of the discipline I need to manage my money. It’s a part of the plan that I’ve spent a lot of time analyzing and going over, so it’s just a matter of executing it every month.
My primary bank has a package that allows you get free investment trades (along with a plethora of other things) if you maintain a certain amount of deposits with them. This includes deposit accounts (checking, savings, CDs), investment accounts (brokerage, IRAs), loans (but not student loans bah!), 10% of your mortgage if you have it with them, and credit card balances. For me right now, my credit card balance is what keeps me over the threshold for the monthly balance minimum to prevent me from paying a fee for the service. So why would I pay credit card interest just to prevent from paying a fee every month? Doesn’t the interest add up to be more than that?
My credit card interest would actually be more than the monthly fee normally, but I decided to try something creative. First thing I did was ask my bank for a better credit card rate, and they complied. While it’s only a temporary rate (12 months), it’s more than enough time to get the rest of my deposit and investment accounts beefed up to where they are satisfying the balance limits all by themselves, plus pay off my credit card before it goes back to it’s original APR. That way, I’m actually paying less each month than I would be all because I’m deciding to keep some credit card debt.
In the meantime I get to enjoy all the benefits of free stock and mutual fund trades (even transaction-fee funds!), no IRA fees, no checking or savings account fees, no credit card fees, free enhanced rewards package, free checks, and consolidated statements with graphs and charts of my total financial picture all for the lowest amount possible. Not a bad deal at all I think. Plus, once I’m out of this transition period and I don’t need the credit card balance to make the minimum balance, it will be that much better. Just another example of how you can make the end justify the means when it comes to your finances.
