cancel
Showing results for 
Search instead for 
Did you mean: 
DaveT315
Intuit Alumni

Is all debt bad?

I agree up to a point.  Debt used to acquire income producing assets is good debt.  If what you are buying on credit does not produce income, that is bad debt if you carry a balance.  Financing the purchase of a rental property is good debt if the rental income is paying off the loan.  Using a credit card to buy groceries, a vacation, a restaurant meal, etc. is bad debt but only if you don't pay off the credit card statement balance in full each month.

 

Most would consider the mortgage on a primary residence a liability (because the asset does not generate income), but necessary debt to provide a roof over your head.  

 

There is no magic number of loans or credit cards for a good credit score.  What matters is your payment history and the length of your credit history and your % credit utilization.  I see a lot of posts in this thread that claim there is a limit on the number of loans and credit cards you can have for a high credit score.  I have 9 mortgages, and seven credit cards and two HELOCs that are treated as revolving credit lines.  My credit score last month was 843  with a credit history of on-time payments for the past 30 years.  My credit card utilization rate is under 10% right now only because I have some credit card balances at 0% APR.  These balances will all be paid in full by the time the 0% promotional rate period expires. 

 

A couple of years ago, one bank I use offered a 0% interest, $0 cash advance fee for a 13-month cash advance.  I used the cash advance to borrow $25000, then used the money to buy a few CDs at my credit union.  The credit union paid me 2% interest ($500) over the following 12 months.  I made minimum payments ($250) to the credit card balance then paid the balance in full when the CDs matured.  I just viewed that experience as receiving a $500 cash gift from my bank for being a good customer.  

 

The point I am trying to make is credit can be your friend if used responsibily.

freeturbo1633
Level 1

Is all debt bad?

Debt is very useful for responsible people who know what they are doing and it is the basis of capitalism allowing business to start and infrastructure we all use to be built. For people who borrow without the means to pay back, it is a road to ruin in a downward spiral hard to stop but not impossible.  Don't borrow if you don't have a way to pay it back,  If you do borrow, pay it off prudently to maximize the benefit and minimize the pain.

freeturbo1633
Level 1

Is all debt bad?

If you live in this society and not off the grid, you need a good credit score.  A credit account is now essential for many on line and off line transaction even taking  a bus or parking at a parking meter  or taking a cab or ride share.  A card with a low limit that you keep paid off as you go can be very useful.  Just use it like cash and pay as you go. Use a different card for larger transactions and leave it at home in a safe place but treat is the same way.  Never late fees and no interest is best is best way to establish credit.

freeturbo1633
Level 1

Is all debt bad?

I do much the same and have paid no interest in decades and no late fees since they changed the laws that stopped some unfair practices by banks and credit card companies that made sure you were late by sending out the statements later and later making it impossible to get a payment back in time.  Banks hired people to trap the unwary and naive into making big mistakes.  Unethical practices are still common.

freeturbo1633
Level 1

Is all debt bad?

Wealthy people who don't need more money still borrow huge sums to make more money. It's easier to borrow if you are low risk and they know you have the assets to pay back the loan.  If you have no credit record to point and no assets to use as collateral or evidence of creditworthiness (low risk to creditor), then you will have to pay higher interest at usurious rates. Usury is forbidden in many Muslim countries and was forbidden in the old testament.  It is one of the first sins named in the Bible.  I don't understand how Christians tolerate this basic principle of their religion.  Many states put limits on interest rates but some don't and so that's why the credit card companies have their headquarters in those states.  Sioux Falls is in one of those states and that's where you send you payments for citicards and why it's there in that state.  Check out the limits in your state and lobby for lower limits or APR for credit and loans of all kinds.

Privacy Settings
v