Jun

30

Is Being In Credit Card Debt A Bad Thing?

Posted In: Personal Finance

Being in debt means that you owe money to creditors. You may for example have borrowed money from the bank for a personal loan, a car loan or money for a mortgage on your new home. Other types of debts include money borrowed for student loans and money spent on credit cards that has not yet been repaid. All of these examples are forms of debt, because they are a financial obligation that you have to the creditor who initially leant you the money.

Only a few decades ago debt used to be fairly rare amongst the general public. This was largely due to the fact that people had to save up money to buy the things they wanted. If they didn’t have the money, they would have to wait until they saved up some more. Back then people didn’t have access to easy credit, and most people were able to manage their money responsibly and control what they spent it on.

The Credit Card

It wasn’t until the 1960s when the credit card was released to the general public that people were, for the first time, able to purchase things they did not currently have the money for. Or in other words, buy things they couldn’t afford.

For many people this resulted in an increased quality of life, as they were able to purchase goods instantly whereas previously it could have taken them months or even years to save up for. However, this came at a cost. The money borrowed eventually had to be repaid with interest, so generally credit cards were initially used for essential items and repaid as quickly as possibly.

Rising Debt

Eventually, society’s attitudes towards the credit card began to change. No longer was the card seen as just a convenience, but it now started to be viewed as an essential part of life, something you couldn’t live without.

Unfortunately, for many people the temptation was too great, and they began to purchase expensive items that they would not easily be able to repay. The more they purchased the more they got themselves into debt, and the harder it became to get out of that debt.

Debt Can Be Both Good & Bad

Credit card debt is a classic example of how debt can be both good and bad. Debt allows you to purchase things you don’t currently have the money for, but will probably have the money for later on. However, debt can also be bad because once you start accumulating debt it will begin to grow, just like how money grows with interest when you put it in a bank.

If you are unable to repay your debt, it will continue to grow until it becomes virtually impossible for you to repay it all back. Many families today are struggling to repay just the minimum payment on their credit card bills, and face constant stresses and strains in their life as the minimum payment level continues to rise with their rising debt.

Debt in itself is therefore not a bad thing, as it can enable you to do things you could not do without it. It is important to remember however, that how you manage your debts will largely determine how much benefit you receive from them. If for example you repay the money you have borrowed on time and in full, you are likely to experience great benefits from receiving that cash injection. If however you fail to repay your debts on time, eventually those debts may consume you just like how people who use their credit cards irresponsibly eventually become consume by their debt.

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Article Source: Is Being In Credit Card Debt A Bad Thing?