By Larry Getlen • Bankrate.com
The amount of personal debt is ever increasing, and a large part of the reason is that credit has never been easier to get. Whereas credit card issuers previously looked for customers who could repay, today card issuers relish the chance to reel in those who'll continuously charge beyond their means at 18 or 20 percent.
But debt is a complex concept. Not all of it is good -- a fact a surprising number of people fail to realize until they're in the hole -- and yet not all of it is bad. When used intelligently, debt can be of tremendous assistance in building wealth.
One of the secrets, therefore, to being smart with your money is to differentiate between good debt and bad debt. While the differences often seem logical, it is a logic that apparently is missed by many Americans.
"When you buy something that goes down in value immediately, that's bad debt," says David Bach, CEO of Finish Rich Inc. and author of The Finish Rich Workbook . "If it has no potential to increase in value, that's bad debt."
Good debt
"Good debt produces cash flow, and bad debt doesn't," says John Waskin, CEO of Bill Free / American Credit Counselors, a nonprofit debt counselling service in the U.S. "If you go into debt buying an apartment building that will produce revenue and deductions, that's good debt. Mortgage debt is good debt.
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