This post is part of Women’s Money Week 2012. For more posts about Debt see Debt Roundup.
Debt is sometimes portrayed as a terrible, scarey thing, something that should be avoided at all costs. But I think it’s important to recognize the positive side of debt and credit, their benefits, and the opportunities they afford when used responsibly.
Here are a few up sides of debt:
- It is possible to buy a home before you’ve saved $100K or more. Imagine a world with no mortgage loans, where you could only own a home after saving the full purchase price? As a homeowner I am thankful for the opportunity to buy a home now and pay for it over the next 30 years – though I’ll certainly pay a price with 30 years of interest payments!
- Build up a solid credit history and credit will likely be available in a financial emergency. I am not advocating substituting a credit card for an emergency savings account, but having available credit can give you a little extra sense of security should you need quick access to funds in a pinch. Keep in mind though that in many cases the creditor can cancel the account at any time. They are less likely to do this if you use the account from time to time, but this doesn’t guarantee it will always be available.
- Carrying a credit card is safer than cash, debit cards, or checks. You can dispute fraudulent charges on a credit card, but if your cash is stolen it’s most likely gone. You can also dispute fraudulent checks or debit transactions but it may be some time before the funds are returned to your account, which can be problematic.
- Finally, there are perks for using credit cards. Cash back, travel rewards, or other promotions give you a little something extra for using credit. Of course the ideal way to use a credit card is to pay it off every month, and you may or may not consider that accruing debt since you wipe the slate clean once a month.
How do you feel about debt? Do you see it more as an opportunity or a burden?