Consumer Debt

You like to buy stuff. So you use a credit card to purchase that Sham-Wow you saw on television, and a Domino’s pizza. As a consumer…you now have consumer debt.

If you would have used cash instead, the stuff you bought wouldn’t have been classified as debt.

And if you bought that Sham-Wow to clean the floor of a pizza parlor you own, the ensuing debt would have been classified as a business debt.

Consumer debt is typically classified on things that are...consumed...and which do not appreciate in value. It’s also voluntary, which means taxes and medical bills don’t count. Consumer debts, however, do carry higher interest rates, due to a lack of collateral.

Add up all of the credit cards, payday loans, auto loans, and other forms of short-term debts owed to creditors by humans, and you have a broader economic definition of a nation’s consumer debt levels. This combined debt is different than what is owned by businesses and governments.