5 Debts to Avoid in the

No doubt about it, some debts are worse than others. A collegiate student loan, for example, can pay off with a fulfilling, high-salary job down the road. That’s good debt.

But a credit card shopping spree at the local mall is forgotten within a week — save for the big bill you’ll get at the end of the month. That’s bad debt.

All told, the total amount of U.S. consumer debt reached $2.5 trillion in 2009, according to the Federal Reserve. That averages out to $8,100 to each U.S. citizen — adult or child. That’s scary debt.

How did we get into this mess? One reason is that consumers, way too often, absorb the worst kinds of debt. These are financial liabilities so worthless and so pointless that they can set consumers back for years with no redeeming value. Let’s take a look at some of the worst offenders.

Credit Card Debt. Yes, it’s no surprise that credit card debt is a major offender. But what consumers may not realize is the derogatory effect of paying only the minimum payment (or “partial payment”) on a monthly credit card bill. Let’s say you owe $10,000 in credit card debt at an interest rate of 18%. If you pay the minimum monthly payment (about 2% of the total debt for most card carriers) it will take you about 57 years to pay the debt off — and that’s assuming you don’t add any new debt.

Auto Loans. It’s no secret that the minute you drive your new car off the lot, it decreases in value (up to 30% according to most statistics). As new cars are depreciating items, it won’t be long before you owe more than your car is worth.

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