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Avoiding Debt: Really?

Debt seems to be an American way of life. If I need a new fridge, I go to Sears, pick the model that fits my needs, and sign the financing paperwork, right? Buying a car includes applying for an auto loan at the credit union, and who could even think of buying a home without a mortgage? Debt is just sort of built into the system.
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However, it's important to differentiate between different types of debt. A loan on your home or car, while it would be wonderful to have both home and car with no loans attached to them, this is not the kind of debt that causes problems. Your home is collateral on the loan. So is your car. The problems arise in what's known as consumer debt. Consumer debt is that loan on the fridge. It's also the credit cards and store charge cards weighing down your wallet.

Stores encourage you to pay by credit card, and there's a reason for that. They know that the average shopper will spend more when payment is a matter of swiping a card rather than cashing a check. And it makes it painfully easy to spend more than you have, more than you can afford, more than you can realistically pay back.


Collateralized debt can be decreased, but avoiding it completely may be difficult, maybe even impossible. Consumer debt can be avoided in most cases, although that's easier said than done. One-hundred years ago, no one had a credit card. While credit was available for specific purposes, it wasn't nearly as wide-spread as it is today. Rare is the family in today's world carrying no consumer debt.

If people could live without credit cards years ago, why can't we do it today? Because it's difficult. The world around us is built on credit card usage. Try renting a car or reserving a hotel room without a card. Additionally, our standards have gone up. Expectations for the holidays and other 'needs' persist, no matter where you stand financially.


While debit cards can solve the first problem, the second one requires a shift in priorities. Start putting money away for emergencies, and remind yourself of your commitment to avoid debt and the fees that come with it. Consumer debt can be avoided, if doing so is important to you. Try it and you'll find that there's less stress and more enjoyment in the things you do have when you avoid debt as much as you possibly can. If you feel you need a credit card, stick with one, and make sure it has the lowest interest rate and the best possible terms.


The credit union is federally insured by the NCUA. Additional insurance of up to $250,000 on your savings accounts is provided by Excess Share Insurance Corporation, a licensed insurance company.
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