‘There Is Good Debt And There Is Bad Debt’

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‘There Is Good Debt And There Is Bad Debt’

When it comes to managing money, Suze Orman says understanding debt is a critical first step — especially for anyone hoping to improve their financial health. On a recent episode of her “

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” podcast, Orman made a clear distinction between “good” debt and “bad” debt — and explained how to handle both.

According to Orman, bad debt “is where you are paying for your present day desires, but your costs are going to be your future day needs.”

The most common example? Credit card debt. It typically comes with high interest rates and can snowball if not addressed quickly.

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says good debt, on the other hand, includes borrowing that may help you build your financial future. This could be a mortgage, a student loan, or even a car loan — as long as it’s used wisely. For instance, if a car is necessary to commute to work and the loan is reasonable, it may be considered a strategic expense.

Even though a car loan can sometimes be a form of good debt, Orman urges caution. “Remember, if you buy a new car, the second you drive it off the lot, it goes down a good 20% or more in value,” she said.

To decide whether a

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, Orman offers a simple rule: if you can’t pay it off in three years, the car may be too expensive. Stretching payments over five, six, or seven years? That could turn a necessary expense into bad debt.

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If you’re dealing with high-interest credit card debt, Orman recommends a few different strategies based on your credit score.

For people with good credit (a FICO score of 680 or higher), she suggests looking into 0% balance transfer offers. Some credit cards offer up to 21 months with no interest, which can give you time to pay down your debt faster without extra charges.

If your score is lower, balance transfers may not be an option. In that case, Orman offers a structured plan:

List all credit cards by interest rate, from highest to lowest.

Write down the current minimum payment due for each card — and commit to always paying at least that much going forward.

Total your minimum payments. Add 20% to this number.

Apply that extra 20% to the card with the highest interest rate.

Once a card is paid off, roll the full amount you were paying on that card to the next highest-interest card — and repeat until you’re debt-free.

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#Good #Debt #Bad #Debt

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