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credit concerns

Posted : April 16, 2018
Last Updated : June 17, 2021

credit concerns

Debt is owing anything to anyone for any reason. Learn the definition of loan, debt, and credit, how credit is used in America, and how to analyze the financial impact of debt on a household budget.

The Debt Monster

One part of dealing with money that gets people into trouble is debt. The Second Foundation is to get out of debt – and stay out of debt. Remember, debt is owing anything to anyone for any reason. Too many families find themselves living paycheck to paycheck because of debt. When you borrow money, you have to pay it back with interest. Interest is a fee that a bank, credit card company, or other lender charges so that you can purchase something and pay for it over time.

Whether it’s credit cards, car loans, etc. going into debt is always a bad idea. Save up and pay for things you want with money and say no to debt.

Selling Debt

All of the interest payments that go along with car loans and credit cards create huge problems for people. If debt causes so many problems, then why do people use debt so often? There are many reasons, but a big one is: debt is marketed to us just like any other product.

Debt is marketed a lot like how cereal, candy, and smartphone apps are marketed. You don’t have to watch TV long before you see and hear the marketing of debt:
  • "Just five easy payments of $19.95!"
  • "30 days same as cash!"
  • "Zero down and 0% interest for 12 months!"
  • "No payments until next year!"

How do you know if you can afford to buy something? Here’s the answer: if you have the cash to pay for it! If you don’t have the cash right now, then you should wait and save up for it. Don’t fall for the marketing traps that will lead you into debt. Be careful, because debt can make people look better-off than they really are! Remember, having nice stuff doesn’t mean someone has a lot of money.

The Impact of Debt

One of the biggest money mistakes people make is going into debt. Do you want something now but don’t have the money to buy it? No problem! Just put it on a little plastic card and worry about paying for it later. (Hint: That’s a bad idea!) But that one little want quickly turns into a lot of wants – a new coat, a new phone, a new computer, and a new car!

You’ve probably seen a few credit card commercials on TV or have seen other people using credit cards. Keep in mind that debt and interest payments stack up until you have a huge pile of your hard-earned money going back out the door in payments. And that means you won’t be able to do or buy other things. Debt eats up a lot of people’s money every month.

The Impact of Debt

Debt is a huge problem. Statistically, the average family sends almost 25% of their hard-earned money back out in payments (often minimum monthly payments) to lenders for credit card purchases, student loans, and car loans.

Final Thought

Don’t give in to the clever marketing that goes along with debt; it’s not worth it.

Source: Ramsey Solutions
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