Diana L. Taylor, Superintendent of Banks
One State Street, New York 10004
STATE OF NEW YORK
GETTING OUT OF DEBT SAFELY
When to Go to a Credit Counselor for Help
What is debt?
Debt is money that you have borrowed and still owe for goods and services you have purchased. You don’t have to
go on a wild spending spree to create a debt crisis. Debt can arise from emergency situations outside of one’s control
but more often, a consistent pattern of spending even just a little more than you make, over time, can lead to an
unsafe or unmanageable amount of debt. The key to gaining control of your debt is to first identify what is good debt
and what is bad debt, and then pay off the bad debt.
Good debt vs. bad debt:
• Good debt is debt you have on items you need but can't afford to pay for up front without using all of your
cash reserves or liquidating your investments. It is debt that can be seen as an investment and can help you
build your credit rating if paid on time, such as a mortgage, car payments or student loans.
• Bad debt is debt you've taken on for things you don't really need and can't afford. The worst form of bad
debt, of course, is credit card debt, since it carries the highest interest rates.
What can be done once debt becomes unmanageable?
• Do not continue to borrow if you can’t make monthly payments towards the debt. Reserve your credit
cards for emergencies. Try not to add to your debt load by making additional or unnecessary purchases.
• Do not use your credit card to borrow cash.
• Create a budget for income, and a debt payment plan. Do not spend more than you earn.
• Use your debit card, not your credit card, to make purchases.
• Pay more than the minimum amount due on your credit card(s) every month.
• Talk to an authorized account representative at your credit card company as soon as possible about
lowering your interest rate and, if possible, arranging a payment schedule.
• As soon as a cr