Many of you may have had a negative experience related to debt. You may have even vowed to never to use credit again. Yet, it’ important that you know that credit has a valuable role in our economy, and frankly it can be impossible to perform some activities- like renting a car or booking an airline ticket, not to mention buying a home- with out credit.
Basically debt can be considered good when it’s used as an investment to improve your life or livelihood, such as a mortgage to buy a home or a student loan to advance ones education. Debt can also be considered good if it’s as a spending tool for smaller purchases, but only when it can be paid off over a short period of time, such as by the end of the month.
Bad debt includes credit card debt that accumulates and doesn’t get paid off monthly, which results in high interest costs and perhaps even late fees. If you used a credit card to pay for dinner at a restaurant and the balance is still outstanding after a year, that’s definitely bad debt. Another bad debt is known as Payday Loans. With this form of credit a borrower writes the Payday lender a check postdated to the borrower’s next pay day and then receives the check amount minus interest can be as high as 400 percent!
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