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Credit isn't Debt!

It's time for a bit of a Friday rant. I apologize in advance, but I get so tired of listening to people talk about credit as if it's synonymous with debt. It happens to be one of my biggest pet peeves, and I've heard it way too much lately, so I think it's about time I vent some frustration and set the record straight.

Begin rant.

Using a Credit Card Doesn't Mean You're in Debt

Let's start with an example. If I use my favorite rewards credit card for every purchase I make and then pay off the balance in full before the due date, I don't consider that debt. A lot of people do, which is unfortunate because they're wrong! Credit isn't debt and debt isn't credit. They're two very different things. Mortgages and auto loans are debt because you pay interest to borrow money. If you pay off your credit card balance in full by the due date, there's no interest charge. That's not debt in my opinion.

Think about it this way. Do you consider yourself in debt to your electric company because you cut them a check every month for keeping your lights on? How about your phone company? Are you in debt to them too even though you pay your phone bill on time every month? Of course you're not in debt. It just doesn't make sense. You're simply paying them for providing a service. While you could quickly find yourself in debt if you failed to pay your bills, that's not the point. The point is credit cards are not all that different. Your credit issuer is providing you with a service, and hopefully some kind of lucrative rewards program too, and the best part is you can enjoy their service for free.

If you're using a no annual fee credit card, you don't have to pay your credit issuer a single penny to use the card. All you have to do is pay for what you bought by the due date. It's that simple. For the last time, credit isn't debt, so can we please stop acting like all credit card users are debt junkies?

End of rant. 

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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