With the average American possessing over $9200 in consumer credit card debt, American families have significantly reduced their potential retirement earnings and many aren't able to save at all. This causes some serious concern for many Americans, and a likely future financial crisis for our country. By understanding the differences between good and bad debt, we can make smarter choices that will positively affect our futures. To give an example: good debt is a debt that returns some monetary benefit where as bad debt doesn't. Comparing the differences between buying and owning a home illustrates the differences perfectly. When buying a home, you have the added benefit of establishing equity with each monthly home mortgage payment as well as by the appreciation of the property, which has a returnable cash value. When renting, you never see a return on your monthly payment. Buying a home is good debt. Renting a home or apartment would be considered bad debt. Another example is payday loans. According to the article I read, payday loans can be considered as either good or bad debt depending on the way in which they are used. If using a payday loan for the purchase of unnecessary merchandise or a vacation, this would be considered bad debt but if you are using them constructively to avoid late payment and the penalty fees associated therewith, payday loans can actually save you money, making them a good debt. You can read more in the article posted on the http://personalmoneystore.com/moneyblog/2008/12/22/payday-loans-good-debt-vs-bad-debt/">payday loan.