When is Taking on Debt Wise

Can you pay off your balance? Tyler Tervooren, author of the blog Advanced Riskology, uses credit cards for almost every purchase he makes, but he pays the full balance every month so he never owes a finance charge."My strategy is to use them to accumulate frequent-flier miles that will allow me to travel the world practically for free," Tervooren says. "I track all my spending and stick to a budget using Mint.com." Mint.com is an online money management and budget-planning site.Still, most people carry credit card debt, Farrell says. "So many of us say we pay off our credit cards at the end of the month, but in reality we may be carrying $1,000 or $2,000 in debt," he says. But for those who are disciplined enough to actually carry a zero balance, this is a great way to use a credit card.

Is there a cost of not borrowing?

Borrowing money to buy a car may seem consumptive rather than productive, but it depends on the situation. Say you need a car to get to work, but yours is unsafe and keeps breaking down -- which costs you time and money.

"If you can only afford to pay cash for a replacement car that costs $1,500, you won't get a very good car," says Syble Solomon, an executive coach and an international speaker on the psychology of money.

"Saving on debt upfront may cost you big later in maintenance bills or missed work because the car breaks down. That's not to say, though, that you need to go into debt to buy a Rolls," Solomon says.

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