I’m hoping you can help me with a question that seems very hard to google for some reason.

I have $20K in debt on 4 cards, and I have set up a plan to pay off the deferred card on time, and the highest interest after that while still paying minimums on everything.

I have roughly $2K a month in expenses. Some come directly from my checking account but about $1200 in my monthly expenses I use credit cards (groceries, cable, gas, etc)

My question is this: can I use my credit cards for the monthly expenses, or should I really be using my debit card for expenses until I have all the credit cards paid off?

Thank you! Forgive me if this is a simple question.

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    I would add to ronjohn and Ben Miller's answers: as soon as the cards are paid off, close the accounts and dispose of the cards with extreme prejudice. Life without debt is much more enjoyable. – pojo-guy Jan 23 at 3:17
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    Cut cable, use cash for groceries and possibly gas. No eating out or vacations. Get your expenses lower. Use the found income to pay off the cards. – Pete B. Jan 23 at 11:32
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    One counter-intuitive piece of advice a financial adviser gave me that has helped me a lot is to put a small amount of your income in a savings account every month or paycheck. The reason is so that you are saving up some money in case of an unexpected expense, like car trouble, disease or injury, or whatever. If you can save up a little money in a savings account while you pay off your debt, then when an unexpected expense comes along, you can pay for it with savings instead of adding it on to the credit card debt. – Todd Wilcox Jan 23 at 13:02
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    @pojo That seems like poor advice. Credit cards, when used responsibly (i.e., paid off in full every month) are a good thing for the consumer. If you're not using credit cards, I question your financial reasoning. – ell Jan 23 at 18:38
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    @sgroves: Because not everyone has the self-discipline to use credit cards responsibly. If someone is prone to making expensive impulse purchases on the cards (e.g. "retail therapy"), then it's better not to have them readily available. – jamesqf Jan 23 at 18:54

While you have credit card balances that are accruing interest, you should not be charging anything new to the credit cards. There are a few reasons for this.

  1. When your credit card has a balance that is accruing interest, then any new charges will start accruing additional interest immediately. That means each purchase you make is costing you much more than you think it is, and it will be that much longer before you get it all paid off.

  2. Your goal is to pay off your credit card debt, but if you keep adding to your credit card debt with new purchases, you have now given yourself a moving target. It is much nicer to see that balance drop with each monthly statement as you work toward your goal. Continuing to make purchases on your credit card would be working against yourself.

  3. You’ve got a plan in place to pay off your cards, which is great. Hopefully, as part of your plan you have a personal budget to ensure that you aren’t spending more than you bring in. This is crucial so that you don’t find yourself in debt again. To help yourself with this, you want to only spend money that you currently have. By putting purchases on a credit card, you might be tempted to spend more than your budget allows. Cash, checks, and debit cards require that you have the money before you spend.

Until you are completely debt free, stick with cash, check, or debit card for your new purchases. After you have paid all your credit card balances down to zero and no longer have any credit card payments, ask yourself at that time if you think you have the discipline to use a credit card as if it were a debit card, only charging what you already have in the bank to pay off in full every month. If you aren’t sure, just stick with the debit card and cash.

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    I don't understand your second point. Apart from the interest issue covered in the first point, this looks zero-sum to me. Is it just about about the psychological effect? – CodesInChaos Jan 23 at 9:52
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    @CodesInChaos Yes, point 2 is psychological. – Ben Miller Jan 23 at 11:21
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    Don't underestimate the importance of psychology. Sticking to a budget is hard. Sticking to a budget while paying off debt at the same time is even harder because it is so easy to convince yourself to pay less towards the debt because you'll catch up later. One method that helps people stick to their budget is to pay off debt based on balance instead of interest rate. As credit cards get paid off entirely, it motivates people to continue, whereas paying down a large debt isn't as gratifying. Lowest balance first isn't the best mathematical choice but it can be the more successful choice. – Dunk Jan 23 at 20:41
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    @pojo-guy Sure, but they're not less than the 0% you get on the debit card. Either way you're putting it on a card but one gives rewards and the other doesn't. I mean, if OP is spending $1200 a month, they could be getting 24 a month in rewards. That's almost 300 dollars a year of free money! But if they aren't disciplined in paying it off as soon as it goes on, then that 300 in rewards will cost you far more in interest. That's why I say robots should get the free rewards dollars, but humans should consider letting it go and just not use the credit card. – corsiKa Jan 24 at 15:47
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    @corsiKa Some banks allow you to setup automatic CC payment at the end of the month, so you can sort of be like robot. But that's only an option once the debt is payed and if you are pretty sure you don't spend more then you have – Maxim Jan 24 at 16:39

can I use my credit cards for the monthly expenses

Sure you can. But I think you're really asking if it's wise to use the card for monthly expenses.

My answer is NO, especially if you're in so much debt because of overspending.

Advice from someone who paid off a lot more than $20K in CC debt: stick the CCs in the back of your metaphorical sock drawer, and let a debit card and spreadsheet be your friend until you've paid it all off (because you can't spend what you don't have).

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    These make a lot of sense. Thank you both very much I don’t know why I hadnt really considered the new purchases are where the interest is most- I don’t really understand interest at all as it turns out – Chelsea Jan 23 at 4:53
  • and after it's been paid off as well to ensure you don't get back into debt – Aequitas Jan 23 at 5:37
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    @Aequitas we started using a CC again after ensuring ourselves that we'd broken the "spend what you don't have" habit. That was about 2 years ago. Now we view the CC as a tool for getting rewards money and having any fraud happen on it instead of our checking account. – RonJohn Jan 23 at 7:03

While in my heart, I respect Ben's answer, let me play devil's advocate.

You don't mention the details for each card, the credit line, interest rate current balance. Say you have one card that offers 2% cash or equivalent miles. If you cycle the monthly $1200 thru this card, that's $14400 in charges, and $288 in perks you'll get back. That amount shouldn't prompt you into making bad choices, but it should be a consideration.

Ideally, you stick to your plan, pay the debt, highest rate first, and as part of the math, get one card with the best perk to zero balance, and use that as you suggest.

Your question isn't too simple, the opposite is true. It's part of the fundamental debate, one side believing that "debt is evil" and "there is no responsible use of credit cards", the other side "use cards to maximize your benefits, including rewards, purchase protection, etc, while being careful to pay in full each month." Of course, there are a range of people between these extremes. The key point is that you follow a path that's right for you.

If you are able to come out of this debt having changed the habits that got you into trouble in the first place, you'd be on track to continue to manage your finances including the cards. If not, the other answers kick in, pay the cards off and say goodbye to them.

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    There are many people that start out innocently trying to chase 1.5-2% rewards and end up in debt paying 15-20% interest. It looks like the OP is included in that group. I do use a cashback rewards card, but before you get back into using credit cards, I would strongly recommend resetting your debt to zero and getting some time in paying cash for things. Think of it as practice before the training wheels come off. And if you decide you don’t have the balance (no pun intended) necessary to remove the training wheels, there is no shame in avoiding credit altogether. – Ben Miller Jan 23 at 13:43
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    We don't have the backstory on what got her into this debt. Other than that, I'd agree with you, Ben – JoeTaxpayer Jan 23 at 13:49
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    This. If OP is ready to deal with credit card responsibly, using a new card (with no balance and paid in full every month) for monthly expenses, while earning 2% back, is better than using debit card with no perks. Catch is, it has to be paid in full every month. If not, it is digging the hole deeper. – Peter M. Jan 24 at 14:20
  • It's exactly like saying "Cigarettes have a couple wonderful effects - the smell and taste. Of course, be careful not to get lung caner, but used carefully you can enjoy those benefits." – Fattie Jan 26 at 11:52
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    Fattie, thank you for sharing your analogy which helps members understand that you are clearly in the "Debt is evil" camp. It's actually close to my own - I have stated that The David (The entertainer Dave Ramsey follows believe he speaks with infallibility) treats debt use similar to drinking alcohol. I've gone so far as to agree that those who have a long history of misuse need to go cold turkey. I hope you are successful with your non-use. I'll enjoy paying for my kid's last college year in full with the rewards accumulated over the last decades. $43K and growing. – JoeTaxpayer Jan 26 at 12:50

I think a better method, IF you have the self-discipline to control your spending (and I do realize that may not be the case), would be to get a new card that offers 0% interest for a year or so, and use that for current expenses while you pay off the current cards.

Of course this assumes that you're 1) going to be able to pay off, or at least significantly reduce, the amount on the current cards; and 2) will have enough extra to pay off the 0% card at the end of the period. If you don't, then using cash/debit for current expenses, and cutting those expenses to the bone, is the better solution.

  • I can't make sense of this. If the OP uses all income to pay down the debt, then where does the money come from to pay down the new card at the end of the intro period? And, if the OP is pushing money to a new budget for that, then how does it increase the amount available to pay down current debt? – jpaugh Jan 24 at 2:14
  • If the new card has a lower (eventual) interest rate than one of the current cards and can be leveraged to pay that card's balance in full (at least by the end of the intro period), then it makes sense. Otherwise... 5 cards is worse than 4, right? – jpaugh Jan 24 at 2:16
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    @jpaugh - James' advice would help OP juggle the debt at the lowest cost. To take it to an extreme, if these zero cards had no limit (e.g. no time limit at 0%, or no end to the new cards/offers) OP would turn high rate debt into zero interest, and either pay it off faster without the burden of interest, or stretch out the payments a bit and build the EF, without worrying that she's saving in a .1% interest account but still owing 18% money. The advice is sound, but not for everyone, I'll grant you that. – JoeTaxpayer Jan 24 at 13:38
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    @jpaugh I've used this method to successfully pay off a sizable amount of debt. I kept a stack of 0% offers laying around and rotated my remaining debt to a new 0% card when the current offer was about to expire. This might seem a little nutty but at 15% (pretty good for a CC), $20,000 in debt will cost you about $250 a month. Being able to apply that to debt (or eat) instead makes a big difference. – JimmyJames Jan 24 at 14:53
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    @jpaugh: My simple assumption is that the OP will have enough income to pay off the interest-bearing cards before the 0% period on the new card runs out. As others have said, a more complicated strategy is to keep doing balance transfers to new 0% cards, which will cost about 3-4% per year, rather than the 15% or more you'd pay on existing balances. Of course if your goal is to get out of debt, it's important to ensure that the total outstanding balance declines over time. – jamesqf Jan 25 at 4:26

As the other answers say there are good reasons not to use your credit cards but I would add the one time you should use them is if there is anything you have to pay for online. Generally I would assume that online shopping is one of the things that you have cut out in your plan, but something like concert-tickets for someone's birthday or necessary travel may require an online purchase and in that case the extra protections afforded by the credit card are worthwhile. Do not use your debit card online.

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    I agree that from a consumer protection aspect, credit cards are usually better than debit cards. However, if you do choose to use a credit card that is currently accruing interest, that extra protection is coming at a very steep cost. – Ben Miller Jan 23 at 16:19
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    While the legal requirements for debit cards are much more lax than credit cards in terms of cardholder liability, in practice it is not difficult (in the USA, at least) to find a debit card with similar liabilities to credit cards. For example, I have two debit cards. One has zero liability, the other is capped at $25. Assuming, of course, that I report fraudulent activity in a timely manner. I could easily use either for a card-not-present authorization and still protect myself from liability for fraud. – user19851 Jan 23 at 18:18
  • Thank you all so much for these comments. I have a credit card with a zero balance that I just haven’t been using because I paid off a big debt and didn’t want to put anything on it. I will use that card, I guess I really don’t know anything about credit cards (as obvious by my debt) but do I need to pay it off the day I make a purchase to avoid interest or just by the due date in full? – Chelsea Jan 24 at 0:52
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    The only sure way to avoid interest is to close the card and shred it once you have confirmation the account is closed. At this stage, given the history presented and the current status, anything less is begging for trouble. – pojo-guy Jan 24 at 6:49
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    @Chelsea you don't need to pay it off to avoid interest until the due date of the very next statement that comes after the transaction. Example - I purchase something January 5th. February 1st, I get a statement. It says my due date is February 26th. I need to pay off that balance by February 26th, or I pay interest on the purchase. – schizoid04 Jan 25 at 3:46

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