In 2017, credit card debt reached an all-time high. The average American household is now $16,000 in credit card debt. Many of the people are not concerned about their credit card debt because they believe that it is good debt. In fact, 13 percent of people in America believe that credit card debt is good debt.
A large percentage of the American population does not know the difference between good debt and bad debt. Good debt is the type of debt that can help you in the future. A mortgage is an example of good debt. If you take out a mortgage for a home, then you can build equity. Your home will have drastically increased in value by the time that you pay it off. You can sell it and make a profit off it. That is why a mortgage is considered good debt even though it is costly.
Student loan debt is also considered good debt. If you earn a college degree, then you can potentially increase your lifetime earnings. People with college degrees make 67 percent more than those who just have high school diplomas.
Credit card debt is considered bad debt because it does not give you any type of return on investment. In fact, it can end up costing you a lot of money in the long run. One of the reasons that credit card debt is bad is because it can quickly get out of control. The balance can also accrue interest, which is why it will take you longer to pay it off.
However, even though credit card debt is bad debt, you can still benefit from having one if it is used responsibly. You can earn rewards and build credit if you use a credit card responsibly. The key to using your credit card responsibly is to avoid letting the balance get too high. Pay off the balance every month if you can.