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.

For example, consumer debt is never recommended when considering a family vacation or when buying an item that will depreciate in value. Unless, of course, there in absolute necessity to the purchase. While vacations and nice vehicles are something we all dream of having, the consumer debt created, from these luxury items, will far outweigh any enjoyment the item may bring.

Quite often, as a consumer, when credit card limits are open and payments are low, we tend to purchase items on impulse or with emotion. To offset this urge, many financial experts agree that purchases, especially when made on credit, should be done in two step process involving the shopping experience following up by the "repeat" shopping experience. In other words, allowing time to pass between the shopping and purchasing experience will ensure your purchase was not made on impulse and some degree of thought was made before creating the additional consumer debt.

When struggling to make ends meet, it is important to re-assess ways and measures in which to earn and create cash flow. Reduce spending, reduce monthly expenses and find creative alternatives to entertainment, will all provide for options to steer clear of consumer debt and, ultimately, may help to reduce interest in the a market where everyone is suffering because of the overwhelming tendency to spend money.