3 min read
Ask people what they feel classifies as debt and you’ll probably get a range of different answers. Chances are, the most common responses will mention the ‘priority’ forms, including council tax or rent and mortgage payments.
However, many types of debt are often treated as part of everyday life. These are so common that many may not refer to them when discussing the matter. For example, credit cards.
According to the Money Charity, it would take someone more than 26 years to pay off the average credit card debt – assuming they made only the minimum payments. Commenting on this analysis, a spokesperson for the organisation stated:
This stark calculation shows exactly how problematic credit card debt can become…”
It is essential that consumers appreciate that credit cards can be a helpful financial tool to be used wisely but mustn’t be treated as an inconsequential loan. While the calculation is an extreme one, sadly it does seem a plausible scenario for too many people.”
As the Money Charity suggests, all too often credit cards are treated as something without consequence. However, if payments are missed or the amount of debt grows to large levels, it can cause severe financial problems. It’s perhaps for this reason that 23% of young men, and 25% of young women, are constantly in debt.
To understand what debt is, we need to explain the differences between its good and bad variants. Although some may feel debt is always bad, this is simply not true. After all, some forms are essential for helping us move on with our lives, from mortgages allowing us to get on the property ladder to student loans paving the way for education. Sometimes it is impossible to live a decent life without owing money.
Bad debt, on the other hand, is when we struggle to repay what we owe. Once an account with a creditor becomes unmanageable, that’s when debt truly becomes a problem.