Good Debt or Bad Debt?

If Rebecca pays her credit card off in full each month, she is not being charged interest on her purchases. The value of her purchase stays the same, making this a good debt.

Since Ted only pays the minimum balance on his card each month, the remaining debt will be charged interest, decreasing the value of his purchases and making this a bad debt.

If Sarah does not pay her credit card balance in full, she will end up paying significant interest on her burrito that she could have paid cash for. With interest, her burrito will cost more, making this a bad debt.

Financing a necessary purchase that you can't afford, like a medical emergency, is considered good debt. But only when you have no other options to pay.

Cash advances often have even higher interest rates than purchases you make on the credit card, so it's always a bad debt.

Only if Megan can keep up with the increase in her monthly payments will her home purchase become a good debt.

Refinancing a mortgage is a good debt, because it lowers your interest rate, as long as you don't take out cash at the closing.

Home mortgages are usually considered good debt. However, if Julia cannot afford the payments, her home mortgage may turn into a bad debt.

As long as the home project increases the value of his home, this is a good debt.

Investing extra money in a high-return, reliable stock market account is always a good debt.

Cashing in a 401K early is rarely a good idea, because fees taxes, and penalties will significantly decrease its value. To top it off, Denis is investing the remaining cash in a high-risk venture, making this a hands-down bad debt.

Since cars decrease in value over time and high interest rates add to the purchase price, this is a bad debt.

Zero-down purchases usually have high interest rates, which decrease the value of the purchase, making this a bad debt.

Although cars are usually bad debt, trading in an SUV for a fuel-efficient car can decrease your monthly expenses and increase your total worth, making the purchase a good debt.

Taking out an unnecessary loan on anything and paying interest is a bad debt.

Education increases a person's value, making this a good debt.

Extremely high interest rates and hidden fees make payday loans bad debt.

Although he will pay interest on his purchase, the engagement ring will likely increase in value over time, making this a good debt.

Attending college will increase the salary Ken may earn upon once he graduations, making student loans a good debt.

No matter what the degree someone earns, further education always increases a person's value and is considered a good debt.