Households 'should categorise debt as good or bad'

Australians have been advised to try to establish exactly how much debt they have and whether it is "good" or "bad".

In a piece for the Australian, Praemium Limited chairman Don Stammer said those with credit cards and home loans should try to calculate the amount they need to pay off each month.

The expert suggested that families with high levels of debt could find they are in difficulties if interest rates rise suddenly or their assets decline in value.

He asserted that households should "take time to calculate the total level of debt, including any car loan, credit cards, personal loans, taxes to be paid, HECS and all."

Mr Stammer explained that some debt – for example home loans to purchase the family house – could be classified as "good debt".

However, bills for holidays or living expenses paid for with credit cards may fall into the "bad debt" category, he added.

This comes after a survey conducted by Veda Advantage found that six out of ten people hope to reduce the amount of money they owe on credit cards within the next six months, the AAP reported.

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