At what point should I go into credit card debt?
Financially, it simply doesn't make sense to go into debt here. It may be that living on credit cards for a while gives you a chance to recover psychologically, but financially, it doesn't make sense. But, let's consider the larger picture here. You are unmotivated and directionless, and may be suffering from depression. That sucks; very many of us have been there. I'd write in great detail, except this site is about finance, so let's limit the scope a little. You've had therapy. It hasn't produced meaningful change. Stop with that therapy; it's not cost-effective. Financially speaking, your goal should be to get back on your feet. You should only be willing to take on credit card debt if it is very, very directly helping you accomplish this. Maybe that means a different therapist. Maybe that means paying for medication, which can often be breathtakingly effective. Heck, maybe that's a suit, something you put on each morning for a couple of hours to focus on getting a job. Maybe that means some other approach. But you should only be willing to take on debt that directly helps you get back on your feet. Should you be willing to continue as you are now, taking on credit card debt for your living expenses? No, definitely not. Credit cards charge obscene amounts of interest, and the evidence is that your current approach is not working. Going into debt in this case makes as much sense as it did for me to continue working for an employer who wasn't paying me. That is, none at all (financially). All that said, I strongly encourage you to get whatever help will work for you. Your finances are important, but they aren't everything. "Credit cards are a reasonable if relatively expensive tool to gain liquidity. If you have $50k in liquid cash, you don't have a liquidity problem for credit to help you solve.  You have 100 months of expenses in cash. I suppose you could see a balance as a motivational tool, but it's all stick and no carrot.   Take the next part half seriously in the spirit of ""what if"" talking therapy: If you feel you need to be motivated to get back to work by the true risk of running out of cash, and take such advice from strangers on the internet, the traditional midlife crisis purchase is a sports car.  At least have some fun in a (depreciating but resellable) asset instead of paying a financier's bonus in evaporated interest!  If there is a luxury car tariff in your country, you may even be able to exploit a personal exemption if you drove in from the U.S.  I suppose this advice could possibly get you booted from the family house as it'll probably come across as a seriously ""ugly American"" move though..." You're situation is actually pretty solid except for the job part. I definitely understand the existential meltdown in your 30s. Luckily you're in web design and have an in-demand job. Maybe go to a code school/design immersive to add some new skills and reinvigorate yourself. If mental health needs to be addressed above all, then definitely make that a priority.  Avoid credit card debt like the plague. If you think you're stressed now, just wait. Borrowing money to pay living expenses will not last long. Also, banks and credit card agencies are very expert at detecting people who try to live off of debt (as you might expect) and they will cut you off completely as soon as they figure out what you are doing. As a general rule, if you go six months without paying a credit card or bank loan, you will be totally cut off from all sources of borrowing for at least 10 years and all your debt will be sold to collection agencies that will then start harassing you. Some collectors will sue you in a court of law and try to seize any assets you have, like a car. It is critical you find a source of income immediately.
"When I look at debt I try to think of myself as a corporation.  In life, you have a series of projects that you can undertake which may yield a positive net present value (for simplicity, let's define positive net present value as a project that yields more benefit than its cost). Let's say that one of the projects that you have is to build a factory to make clothing.  The factory will cost 1 million dollars and will generate revenue of 1.5 million dollars over the next year, afterwhich it wears out. Although you have the knowledge to build this wonderful factory, you don't have a million bucks laying around, so instead, you go borrow it from the bank.  The bank charges you 10% interest on the loan, which means that at the end of the year, the project has yielded a return of 400k. This is an extremely simplified example of what you call ""good"" debt.  It is good if you are taking the debt and purchasing something with a positive value. In reality, this should be how people should approach all purchases, even if they are with cash.  Everything that you buy is an investment in yourself - even entertainment and luxury items all could be seen as an investment in your happiness and relaxation.  If more people approached their finances in this way, people would have much more money to spend, William" "Pay cash.  You have the cash to pay for it now, but God forbid something happen to you or your wife that requires you to dip into that cash in the future. In such an event, you could end up paying a lot more for your home theater than you planned. The best way to keep your consumer credit card debt at zero (and protect your already-excellent credit) is to not add to the number of credit cards you already have.   At least in the U.S., interest rates on saving accounts of any sort are so low, I don't think it's worthwhile to include as a deciding factor in whether not you ""borrow"" at 0% instead of buying in cash." Mathwise, I absolutely agree with the other answers.  No contest, you should keep getting the match.  But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit.   If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once.  Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense.  (This is essentially what Dave Ramsey teaches, BTW.) "100% debt free is an objective. Being there is good, but as long as you have a plan to get there, are sticking to it and it's moving you towards it at a reasonable rate (e.g. ""I will be debt free by the end of 2011.""), you should be in good shape. It's when you don't ever expect to be debt free that you have a problem. Going into debt is one question and a very situation dependent one. Getting back out is another and a very easy one: pay off all debts as a fast as you reasonably can, starting with the highest interest ones. OTOH this doesn't imply that you should forgo every optional expense (including things like savings and entertainment) to pay off debts, that would be unreasonable, but just that paying down debts should always be considered when thinking about what to do with money." My opinion is to hold off. I don't see housing market rising anytime soon, possibly even going lower, so you don't have to worry about getting in before it rises. Pay off the credit card debt, maybe even earlier if possible, then that flexibility will be there, the divorce proceedings may have an end in sight, and therefore you'll know more about any outcomes from that. The economy is still shaky, the flexibility of renting may come in real handy. "First, pay off the highest interest first.  If you have 80%, pay it first.   Paying off a card/loan with a lower rate, but a lower payment or a lower balance can help your mental capacity by having fewer things to pay.  But, this should be a decision where things are similar, such as 20-25%, not 20-80%.   What about any actual loans?  Any loans with a fixed payment and a fixed amount?   If you must continue to use CC while paying them off, use the one with the lowest interest rate.   Call all of your debtors and ask for reduction in interest rate.   This is not the option to take first...  This is a strategic possibility and will cause credit score issues... If you are considering bankruptcy or not paying back some, then you have even more negotiation power.  Consider calling them all and telling them that you only have a little bit of money and would like to negotiate a settlement with them.  ""I have only a limited amount of money, and lots of debt.  I will pay back whomever gives me the best deal.""  See what they say.  They may not negotiate until you stop paying them for a few months...  It is not uncommon to get them to reduce interest (even to 0%) and/or take a reduction in the amount due - up to 25 cents on the dollar.  To do this, you might need to pay the amount all at once, so look into loans from sources like retirement, home equity, life insurance, family...   Also, cut out all expenses.  Cut them hard; cut until it hurts.  Cut out the cell phone (get a pre-paid plan and/or budget $10-20/month), cut out all things like alcohol, tobacco, firearms, lottery, tattoos, cable tv, steak, eating out. Some people would suggest that you consider pets and finding them a new home.  No games, no trips, no movies, no new clothes...  Cut out soft drinks, candy, and junk food.   Take precautions to stay healthy - don't wear shoes in the house, brush your teeth, take a multi vitamin, get exercise, eat healthy (this is not expensive, organic stuff, just regular groceries).   Consider other ways to save, like moving in with family or friends.  Having family or friends live with you and pay rent.  Analyze costs like daycare vs. job income.  Apply for assistance - there are lots of levels, and some don't rely on others, such as daycare.   Consider making more money - new job, 2nd job, overtime, new career.   Consider commute - walk, bike, take the bus.  Work 4/10's.  Telework.   Make a list of every expense and prioritize them.  Only keep things which are really necessary.   Good Luck." You need to pay off the entire balance of 7450 as soon as possible. This should be your primary financial goal at this point above anything else. A basic structure that you can follow is this: Is the £1500 balance with the 39.9% interest rate the obvious starting point here? Yes, that is fine. But all the cards and overdraft debts need to be treated with the same urgency! What are the prospects for improving my credit score in say the next 6-12 months enough to get a 0% balance transfer or loan for consolidation? This should not be a primary concern of yours if you want to move on with your financial life. Debt consolidation will not help you achieve the goals you have described (home ownership, financial stability). If you follow the advice here, by the time you get to the point of being eligible, you may not see enough savings in interest to make it worth the hassle. Focus on the hard stuff and pay off the balances. Is that realistic, or am I looking at a longer term struggle? You are looking at a significant struggle. If it was easy you would not be asking this question! The length of time will be determined by your choices: how aggressively you will cut your lifestyle, take on extra jobs, and place additional payments on your debt.  By being that extreme, you will actually start to see progress, which will be encouraging. If you go in half-committed, your progress will show as much and it will be demotivating. Much of your success will hinge on your mental and emotional toughness to push through the hard work of delaying pleasure and paying off these balances. That is just my personal experience, so you can take it or leave it. :) The credit score will take care of itself if you follow this method, so don't worry about it. Good Luck! "My advice: IMO, all things being somewhat equal, you should always try to retire debts as quickly as possible in most cases, so start with the small cases. The method of calculating credit card interest is written on the statement. Usually it is ""average daily balance method"". Don't sweat the details. Just pay the things off." It's very simple: The whole purpose of a credit card for the credit card company is that you borrow money and then pay them extortionate interest for the rest of your life. The way you describe yourself, you are the perfect victim. So the obvious thing for you to do is to not touch credit cards with a barge pole.  IF you decide to use a credit card, then what you should really, really do is to pay back the maximum amount possible all the time. Best is to pay off the credit card in full if at all possible.  Consider this: If you owe them money, the interest rate is so high that with the minimum payment, your debt will be growing all the time. Spend $1,000, pay $10 a month, and next year you owe $1,100 without having used the credit card at all. If you pay $32 a month as you mentioned, your $1,000 purchase is actually a multi-year loan. If you need a multi-year loan for a $1,000 purchase, an ordinary loan from your bank will be much, much cheaper. First, before we talk about anything having to do with the credit score, we need the disclaimer that the exact credit score formulas are proprietary secrets that have not been revealed.  Therefore, all we have to go on are broad generalities that FICO has given us. That having been said, the credit card debt utilization portion of your score generally has at least two components: an overall utilization, and a per-card utilization. Your overall utilization is taken by adding up all your credit card debt and all your credit limits and dividing.  Using your numbers above, you are sitting at about 95%.  The per-card utilization is the individual utilization of each card.  Your five cards range in utilization from 69% to 100%. Paying one card over another has no affect on your overall utilization, but obviously will change the per-card utilization of the one you pay first.  So, to your question: Is it better on the credit score to have one low-util card and one high-util card, or to have two medium-util cards?  I haven't read anything that definitively answers this question. Here is my advice to you: The big problem you have is the debt, not the credit score.  Your credit card debt should be treated like an emergency that needs to be taken care of as quickly as you possibly can.  Instead of trying to optimize your credit score, you should be trying to minimize the number of days until all of your credit cards are completely paid off.  The credit score will take care of itself once you get your financial situation back on track. There is debate about the order in which one should pay off their debts, but the fact of the matter is that the order is not as significant as the intensity at which you pay them all off.  Dedicate yourself to getting rid of the debts as fast as possible, and it won't matter much which order they get paid off in. Finally, to answer your question, I recommend that you attack the card debt one at a time instead of trying to pay them off evenly.  Not because it will optimize your credit score, but because it will help you focus your debt-reduction energy as you work on resolving your debt emergency.  Fortunately, the credit utilization portion of the credit score has no history, so once you pay all of these off, the utilization portion of your score will get better immediately, and the path you took to get there will be irrelevant. After the credit cards are completely paid off, and you have resolved never to spend money that you don't have again, it is time to work on the student loans.... You should pay things off every month.  You don't want to be paying 10%-25% interest if you don't have to.  If you regularly use you card, the credit agencies can't tell the difference.  The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time.  There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies.  Not all of them do.  This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit.  They are basically looking to make money fro you.  If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest.  You can also call them and ask.  They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk. Does the average debt of over $5000 per person count debt that is less than say 6 weeks old? I set my card to auto pay in full each month but I always have a few thousand that I owe since it's not due for a few weeks. I funnel all my spending through cards to take advantage of points. This is a slightly different reason to any other answer I have seen here about irrationality and how being rationally aware of one's irrationality (in the future or in different circumstances) can lead you to make decisions which on the face of it seem wrong. First of all, why do people sometimes maintain balances on high-interest debt when they have savings? Standard advice on many money-management sites and forums is to withdraw the savings to pay down the debt. However, I think there is a problem with this. Suppose you have $5,000 in a savings account, and a $2,000 credit card balance. You are paying more interest on the credit card than you get from the savings account, and it seems that you should withdraw some money from the savings account, and pay off the cc. However, the difference between the two scenarios, other than the interest you lose by keeping the cc balance, is your motivation for saving. If you have a credit card balance of $2,000, you might be obliged to pay a minimum payment of $100 each month. If you have any extra money, you will be rewarded if you pay more in to the credit card, by seeing the balance go down and understanding that you will soon be free from receiving this awful bill each month. To maintain your savings goal, it's enough to agree with yourself that you won't do any new spending on the cc, or withdraw any savings.  Now suppose that you decide to pay off the cc with the savings. There is now nothing 'forcing' you to save $100 each month. When you get to the end of the month, you have to motivate yourself that you will be adding spare cash to your $3,000 savings balance, rather than that you 'have to' pay down your cc. Yes, if you spend the spare cash instead of saving it, you get something in return for it. But it is possible that spending $140 on small-scale discretionary spending (things you don't need) actually gets you less for your money than paying the credit card company $40 interest and saving $100? You might even be tempted to start spending on your credit card again, knowing that you have a 0 balance, and that you 'can always pay it off out of savings'. It's easy to analogize this to a situation with two types of debt. Suppose that you have a $2,000 debt to your parents with no interest and a $2,000 loan at high interest, and you get a $2,000 windfall. Let's assume that your parents don't need the money in a hurry and aren't hassling you to pay them (otherwise you could consider the guilt or the hassle as a form of emotional interest rate). Might it not be better to pay your parents off? If you do, you are likely to keep paying off your loan out of necessity of making the regular payments. In 20 paychecks (or whatever) you might be debt free. If you pay off your loan, you lose the incentive to save. After 20 months you still owe your parents $2,000. I am not saying that this is always what makes sense. Just that it could make sense. Note that this is an opposite to the 'Debt Snowball' method. That method says that it's better to pay off small debts, because that way you have more free cash flow to pay off the larger debts. The above argues that this is a bad idea, because you might spend the increased cash flow on junk. It would be better to keep around as many things as possible which have minimum payments, because it restricts you to paying things rather than gives you the choice of whether to save or spend. You should check out Dave Ramsey's Baby Steps.  He has an great and well organized plan for getting out of debt and building wealth.  My wife and I have followed the plan and will be paying off our home this year :)  His advice on debt payments is to pay off the smallest balance first.  This helps motivate you and your husband to push harder on your debts.   Once the first pay is paid the money that would have gone to that debt is applied to the next smallest debt and so on.  This is called a 'debt snowball' since by the end you will have plenty of money to pay that last few debts.  While working on the smallest debt, making minimum payments on the others. Stop using the credit cards entirely! Don't use gimmicks to avoid facing the reality of the debt.  Close your accounts and commit to never borrowing money again. This is a huge physiological shift.  I used credit cards all the time for decades, that is a thing of the past for us, we pay cash or don't buy it.  In your case, paying the 80% interest loan off is likely to be priority.  I didn't even realize that was legal.  Hopefully that is also the smallest balance.   Start making a monthly budget and sticking to it.  Check out Dave's 'irregular income' budget form, it is meant for couples in your situation.  The first steps will be to pay food, rent, utilities and transportation.  After that, list your debts in priority order and pay them as your husbands income comes in during the month.  Don't despair, you two can get your financial life cleaned up! You just need a good plan and a lot of focus. Remember that if you make charges as the starting of your billing cycle, then you are receiving a free ~60-day loan. For those that are able to receive high interest rates on their, this means a greater opportunity to earn on their money. For example: Your billing statement ends on Jan 5th. On Jan 6th, you max out your credit card. Your billing statement ends on Feb 5th. Depending on your credit card, your grace period can be anywhere from 20 to 30 days. If your bill is due Mar 7th, you just gave yourself a free 60 day loan. If you have multiple credit cards with different due dates and long grace periods, you can rotate which cards you max out to optimize the money you keep in savings.