Personal debt is no joke in Washington. In fact, some studies have shown that the average household in the United States — when eliminating homes where no credit cards are used — has about $15,950 in debt on those cards. It was also found that the interest rates on those cards tended to be in the teens. This study was done in 2012.
When trying to control debt, it is worth noting that not all debt is the same. Good debt could include buying a house, for example. Of course, it is possible to take out too large of a loan, which can make this into bad debt, but a reasonable mortgage can be a better move, financially speaking, than renting for years on end.
That being said, some debts are worse than others. Yes, credit cards can be used wisely. Some people use them more like debit cards, only spending what they know they can pay off when the month comes to an end. However, if you spend at a faster rate than you earn, you can quickly fall into debt. Some would even say that this is the fastest way to start a problem with debt, as the numbers listed above seem to confirm.
If you’re trying to pay off your debt, you are best to look at what has the highest interest rates. Aim to eliminate that debt first, slowing down the rate of new debt.
Of course, not all debt can be taken on in these conventional ways. People who are facing overwhelming credit card debt need to make sure that they know just what legal options they have, such as declaring bankruptcy.
Source: CNN Money, “Controlling your personal debt” Oct. 28, 2014