Are These 5 Things Worth Credit Card Debt?
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People don’t talk much about their credit card debt, but it’s common to have it — and to have mixed feelings about it.
A recent NerdWallet survey found 55% of U.S. adults have been in credit card debt, and 86% of those people regret it. Even so, 71% of Americans say they’d be willing to go into credit card debt to pay for certain expenses.
Here are five things Americans say they’d be willing to go into debt for, with breakdowns by age group, and some advice on avoiding debt for nonessential expenses.
1. A major life event (wedding, having a child, etc.)
One-third of Americans (33%) say they’d be willing to go into credit card debt for a major life event, but it’s not something NerdWallet recommends. Assuming you have some amount of control over your major life events — and this isn’t always the case — you have the option to save money beforehand to pay for your ideal situation, or to lower your expectations to fit your means.
2. Planned medical expenses (regular appointments, tests, etc.)
Emergencies happen, and we don’t fault anyone for putting urgent medical costs on a credit card so they can get the treatment they need. However, almost 1 in 5 Americans (19%) say they’d be willing to go into credit card debt to pay for planned medical expenses, and there are definitely better options — such as funding a health savings account or flexible spending arrangement.
3. A dream vacation
Who among us hasn’t daydreamed about a perfect getaway? Around 1 in 6 Americans (16%) say they’d be willing to go into credit card debt to pay for their dream vacation. But since the link between debt and regret is so strong, consider saving up beforehand, so when you get home you'll have only vacation memories, not vacation bills.
According to our survey, 14% of Americans would be willing to go into credit card debt to pay for gifts. Gift-giving is important to many people, and it may be hard to imagine cutting back on goodies for your loved ones. But it’s not a good idea to spend money you don’t have on nonessential purchases, even when the joy is for others rather than yourself.
5. Dining out for special occasions
When we get good news — a promotion, say, or a baby on the way — or an anniversary comes around, it’s natural to want to go out to celebrate. But 12% of Americans would be willing to go into credit card debt to pay for eating out on special occasions. We think they should reconsider: Just because it's special doesn't mean it has to be so expensive you can't afford it.
Preventing credit card debt for nonessentials
These things aren't unreasonable expenses. It's just that they're best paid for with cash (or a credit card you pay off in full every month). For large expenses, like a major life event or a dream vacation, save up to pay for them. For smaller things, like dining out, gifts and planned medical expenses, incorporate them into your monthly budget or set up a special savings account for irregular spending.
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