[chjohasbrouck]

Risk is one of the things that debt can represent, sometimes, but there can be debt that doesn't involve any risk, and there are risks that don't involve debt.

What's risky about using a credit card to buy a kayak?

And how does investing money you already have in small cap equities represent a debt?

I think for the vast majority of individuals just trying to make good personal finance decisions, "don't take on debt" is (on average) great advice.

[nailer]

> What's risky about using a credit card to buy a kayak?

If you don't pay back the debt, in 72/(interest rate) (interest rate period) the kayak will cost twice the price.

http://www.investopedia.com/ask/answers/04/040104.asp

I think we're agreed on the core principle here though:

> I think for the vast majority of individuals just trying to make good personal finance decisions, "don't take on debt" is (on average) great advice.

100%

[mockery]

(I don't really agree with the simplification of debt = risk. Despite that...)

> What's risky about using a credit card to buy a kayak? If you unexpectedly lose your job or are otherwise unable to pay off the card on the schedule you expected, you'll incur significant interest on the debt and end up having to pay far more than you originally planned. Compared with saving up money and paying in cash, there are clearly additional risks incurred when using the card.

(If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower.)

[hueving]

>If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower

Right, but you're still taking on debt for the month and then paying it in full. What is the risk?

[mseebach]

As with risks, so with debts. There are large ones and small ones. Paying down a balance on a credit card every month is pretty low risk, but not as low as paying with a debit card in the first place.

Also, a credit card you're paying down monthly isn't really 'debt', isn't it usually something you do for the air miles or cashback?

[hueving]

>Paying down a balance on a credit card every month is pretty low risk, but not as low as paying with a debit card in the first place.

Not when you account for the stolen card scenario. When someone steals your debit card and racks up charges, it locks up real money (your bank account balance) that you can't use until it's resolved. A stolen credit card just locks up a credit-line.

However, even if you ignore that, I'm still missing what risk you see with a credit card that results in it being higher risk than a debit card. What is the risk I'm missing?

>Also, a credit card you're paying down monthly isn't really 'debt', isn't it usually something you do for the air miles or cashback?

It's very short term debt. I do it for two reasons, air miles/cashback, and for better protection when things go south. In addition to the stolen card scenario above, some credit cards (e.g. an amex I have) will provide additional protection for things like rental cars (additional insurance) or even stolen goods (refunds for electronics stolen from your vehicle).