[Musing] Can You Ever Justify Paying Credit Card Interest?

In past posts I have vehemently expressed my disdain for ever paying credit card interest. Aside from not wanting to spend more money than I have to, it is just too easy not to pay any interest: simply pay off your credit card statement in full each month. But are there ever circumstances where you can justify paying interest on your credit card bills? Below are a few scenarios where we will discuss whether or not paying the interest is justified.

Leaving a balance so I pay interest will improve my credit score.

This is 100% false and therefore the interest is not justified. There is a common misconception floating around that causes people to believe that carrying a balance (and therefore paying interest) on their credit cards will actually increase their credit score. At best, this strategy will do nothing to your credit score. At worst, it will actually lower your credit score due to the accumulating balance and interest increasing your overall credit utilization.

I don’t want to drain all my funds in my bank account just to pay off my entire credit card statement.

The reasoning behind this is part psychological and part practical in my opinion. It can be very nerve-racking to see your bank account diminish very quickly after paying off a large bill. Slowly paying that bill off over time might help you sleep better each night knowing you still have a large chunk of money in the bank but in the end you will be paying hundreds, if not thousands, of dollars more over the course of time it takes to pay off the credit card bills. The practical reasoning is that if you drain your bank account paying off one bill, what happens if there is an emergency where you need to suddenly pay for an auto repair bill or maintenance for your home? Maintaining a solid emergency fund is key to avoid further credit card debt. This is a tough dilemma and it might look easy to justify paying some credit card interest to avoid a more serious situation but I will argue it is still not justified. My solution: wait the extra few weeks or months to save up for the non-essential purchases you won’t be able to pay off at the end of the month. Always treat a credit card like cash, you can only spend what you can comfortably can afford. Don’t view credit cards as loans!

I didn’t know you could pay your balance off in full in order to avoid interest.

Surprisingly I have heard this statement the most. There still seems to be this major misunderstanding that credit cards force you to pay interest. This is the excuse I have heard so many people give for wanting to use cash over credit. In one sense, these people can’t be blame since credit card statements sometimes make it confusing to figure out how much you should pay (minimum payment versus total balance). However, as a reader of this site just know: you will never pay a cent in interest if you always pay your statement balance off in full each month! Doing so will be the same like paying with cash but with the added the benefits that credit cards give like rewards and various other perks.

In my opinion, there really isn’t a good excuse to ever pay credit card interest. If you cannot pay your balance off in full, don’t buy the things that will bring you over that threshold. Perhaps there are some emergency medical, auto, or other large expense that may cash vs creditneed to occur. However, with most of these scenarios there are other strategies to use to pay them off without having to incur hefty credit card interest. It takes a degree of discipline to ensure you are only spending what you can pay off each month. Remember: a few months of paying credit card interest can erase potentially years of credit card rewards and cash back! If you cannot control your spending do not use credit cards, plain and simple.

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