Junk Debt 101

Last time we talked about the meaning of debt.  We looked at the dictionary meaning, the meaning according to the Fair Debt Collections Practices Act (FDCPA) and an every day meaning of the word.  It was pointed out that “debt” is not always money owed.  It can be any number of things.  It can be a service that you owe someone. It can be a meal that you owe. In general, debt is owing something in return for something that you have received and agreed to reciprocate but not yet reciprocated.

Many people confuse the term “credit” with the word “debt”.  They are not one in the same thing.

Credit is the amount of financing that is available to you.  It does not become a “debt” until you actually use the financing.  An example would be — you have a credit card that has a $1,000 credit line.  You haven’t used the card yet and do not owe $1,000 to the credit card company.  When you use the credit card — let’s say you splurge on supper and use $200 of the credit line — then this becomes a debt.  It is money that is owed to the credit card company.

Till next time,

JT Locke
JunkDebt101