Last week, we discussed some of the methods available for paying off credit card debt. That might have some of our Pennsylvania residents wondering why people want or need credit in the first place. With that in mind, it is important for all of our neighbors to understand some basics of personal debt.
There are good debts and bad debts, but most people don't realize this. The good debt is debt that you put to work for you. This might be a mortgage so you have a home or student loans so you have a good education.
Some examples of bad debt are vacations or food that are paid for with a credit card. The issue with these types of debt is that you might end up racking up interest for months while you pay for these items. This means that even if you got a good deal on these items, they might not be a good deal in the end.
For anyone who is facing credit card debts, the need to take control of his or her spending is real. Ideally, you will be able to pay off credit card debts when you get the bill. If not that soon, it shouldn't go more than a couple of months without you being able to pay it off.
As tempting as it may be since you want to get out of debt, you likely shouldn't borrow from a 401(k) to get out of debt. By the same token, don't fall into the habit of paying only the minimum amount on your credit card bills. Both of those scenarios can prove devastating in the end.
Another option you have for taking control of your credit card debt is bankruptcy. Finding out about how to file bankruptcy, including the education and counseling requirements, can help you to decide if this option is right for you.
Source: CNN, "Controlling your personal debt" accessed Jan. 29, 2015