Make it work for you, not against you

Carrying too much high-interest consumer debt is among the most common mistakes people make. It can put a strain on even the best-laid financial plan. And Americans owe a lot. Here are some statistics from a July 2009 survey by the Federal Reserve Board:

• Consumer debt is $2.58 trillion.
• Revolving consumer debt totals about $928 billion.
• The average household carries $7,861 in credit card debt, a slight decrease from 2008.
• Nearly 80 percent of American families have a credit card, and 44 percent of families carry a balance on their credit cards.

But not all debt is bad—sometimes it's even necessary. From credit cards to auto loans to home mortgages, debt is an important part of life. The key is to learn to manage it and not let it manage you.

Take control

What you can qualify to borrow is often more than what you should borrow. Here are some guidelines to help you manage credit and debt effectively:

• For starters, not all debt is the same. Know the difference between "good debt" and "bad debt"—it will help you decide how to use credit wisely.
• Next, understand how to use credit as a tool. Before you open another credit account at your favorite retailer to get that limited-time discount or you buy a new big-ticket item like a new car, consider what you'll really pay once you include the cost of interest.
• When it comes to credit, you can't get around your FICO® score—lenders use it to decide how much you can borrow, and at what rate. Understand your credit score and take steps to improve it.
• Having a credit card certainly makes life more convenient, but don't let your credit card use get out of hand. Get tips to help you manage a credit card better.
• It takes work to manage credit and debt, don't let someone else ruin it for you. Protect yourself and take steps to prevent identity theft.