Consumer Debt: Good Versus Bad

In the United States, millions of Americans carry significant levels of consumer debt. While some consumer debt is good, there are many American families struggling to meet their basic essential needs due to the overwhelming amount of debt they have to pay. With savings and retirement plans struggling to benefit, consumer debt has taken a life form of its own, leaving many individuals in situations where early adulthood spending has forged the way to next to nothing in terms of retirement savings.

Because consumer debt affects the interest rates in the market, many credit card companies and banks are taking in astounding revenue each year, just on interest rate payments alone. Because there is a demand in our society for consumer debt, the interest rates have steadily climbed, along with credit limits, leaving many families with enticing options for spending in an age where self control has gone to the wayside.

While creating consumer debt can be advantageous, there are specific situation when debt is necessary and will provide some financial security to a family. For example, in the event of an emergency, such as a vehicle malfunction, taking out an unsecured loan or using a credit card may be necessary to repair the vehicle and ensure the family is well on the way to pursing financial stability. In other words, without access to some degree of debt, many American families would be unable to financial withstand emergency situations.

We also need consumer debt in order to establish a credit history for ourselves and should use consumer debt, and manipulate interest rates, to our advantage. But, all too often, there are many disadvantages to creating consumer debt, most notably the financial distress placed on families when self control is not used in purchases.