Jean Chatzky's New Debt Advice
I know. You've seen how fast the interest piles on to your credit card balances. But that's not what I'm talking about here. Credit card debt is bad, yes. You want to avoid it, and you can do that by paying your balance in full every month, or, if you don't trust yourself, locking those cards in a drawer where you can't get to them.
But there is such a thing as good debt. A mortgage falls into this category because it generally carries a low interest rate and helps you build equity in your home. Very few people can afford to pay for a house upfront, and even if they can, mortgage rates are so low—particularly now—that they'd often do better if their money was in the market. Student loans also get filed in this box, especially federal loans carrying low interest rates. Like mortgages, student loans allow you to build value. You're making an initial investment that will come back to you in the form of a better job and a higher salary.
So now you know the difference between debt that hurts and debt that helps. But there are no doubt other aspects of the debt game that still have you confused, and it doesn't help that over the past few months we've seen shifts in the mortgage, student loan and credit card worlds nearly every week.
Here are the answers to just a few of the questions that are no doubt on the tip of your tongue.