Credit cards, student loans, mortgages – these days, it seems like everyone has some form of debt. Our society has increasingly normalized the idea of borrowing money as an inevitable part of life. But while responsible use of credit can be beneficial, the creeping acceptance of perpetual indebtedness is cause for concern.
The Allure of Easy Credit
It’s no secret that lenders actively market the convenience of credit. Credit card commercials portray carefree shoppers effortlessly swiping their cards with big smiles. Banks tempt homebuyers with low introductory mortgage rates. Colleges and universities prominently advertise financial aid options for students. The message is clear: go ahead and borrow the money now – don’t worry about paying it back later.
This “buy now, pay later” mentality has led many people to take on more debt than they can reasonably afford. A 2019 survey by CNBC found that 34% of Americans have more credit card debt now than they did a year ago. With interest rates on the rise, these burgeoning balances will become increasingly difficult to pay off.
The Hidden Costs of Borrowing
Using credit often feels like “free money” – but this perception is misleading. Borrowed money is not free; it comes at a steep price called interest. Credit card interest rates now average over 17%. On a $5,000 balance, that equates to $850 in interest charges per year. Mortgage rates are lower, but still add tens of thousands of dollars in interest payments over the lifetime of the loan.
These interest costs really add up over time. According to Student Loan Hero, the average student loan borrower will pay $39,351 in interest on their debt over a 20-year repayment term. That’s nearly double the original loan amount!
Beyond interest, borrowing also impacts your credit score and future ability to get approved for loans or rental housing. Missed payments lead to late fees and increased interest rates. Taking on more debt than you can handle is a recipe for financial disaster.
The Risks of Normalizing Debt
While responsible borrowing can facilitate important purchases like a home or education, the normalization of perpetual debt is economically risky for both individuals and society.
On an individual level, getting too comfortable with debt impacts financial stability. Servicing mounting interest payments prevents people from saving, investing, and building wealth. It becomes harder to absorb unexpected expenses or income disruptions. Over-indebtedness is a major source of stress, depression, and marital strife.