Not Debt Free!

Mike's friend isn't debt free if he's going to put $15K on a credit card. He should get a small loan from a credit union instead.

QUESTION: Mike’s friend just sold a house and netted $50,000. He wants to buy a $65,000 house, put the $15,000 balance on a 5.9% credit card and consider himself debt free because the house is paid for. Is that true?

ANSWER: He’s not debt free … he owes $15,000 in credit card debt. The credit card companies aren’t predictable. Those rates are usually teaser rates, which means they can jack his rate up whenever they want. Go to the credit union and get a small loan for $15,000. He’s playing with snakes here and he’s going to get bit if he uses the credit card.