Debt Facts

Debt woes are certainly not a novel concept. In fact, debt struggles date all the way back to the ancient Greeks, who would enslave debtors who didn't make good on their financial obligations. Thankfully, we've evolved beyond these draconian repercussions for delinquent debtors, but the fundamental problem lingers. Today, 40% of Americans report being worried about debt, which makes the need for debt relief all the more acute. Moreover, modern debt does not discriminate-everyone from the astonishingly wealthy to the lower class grapples with debt obligations and the ominous prospect of bankruptcy. Movie stars, overpaid athletes, and musicians usually have just as much trouble with debt as those who live paycheck to paycheck. The bottom line: debt impacts people from all walks of life, but the good news is that it is not an inescapable fate.

Good vs. Bad Debt

Before we assail you with a litany of debt statistics, it's important to delineate the difference between good debt and bad debt. Some debt, usually secured debt, is a natural part of financial life and usually has an overall positive effect on one's financial health. For example, going into debt to buy a home is an example of good debt. When you finish paying this debt off, you will own a valuable asset that will have undoubtedly appreciated in value, and you will have enjoyed some tax breaks along the way. This kind of secured debt, or debt linked to property, is not the target of debt relief efforts. By contrast, debt relief usually targets bad debt, or unsecured debt, usually manifested in the form of credit card debt. This kind of debt has unbelievably high interest rates and usually offers no long-term financial benefits. The things you purchase with unsecured debt, such as meals out, vacations, clothes, etc., usually won't even be around anymore by the time you finish paying off the debt-a surefire sign that the debt wasn't worth it.

Quick Facts about Debt

Here are some statistics about debt that are most relevant to debt relief:

• The average American household has just under $10,000 in credit card debt
• Roughly 60% of credit card accounts are not paid off in full every month
• The average credit card purchase will cost you 112% more than if you had paid cash
• 40% of American families outspend what they earn each year
• A $1,000 credit card charge will take 22 years to pay off and cost over $2,300 in interest, assuming minimum monthly payments of 2% are made