Which of the following is an example of bad debt?

Bad debt typically refers to borrowing that does not contribute to the creation of value and can lead to financial instability. Credit card debt for electronics is an example of bad debt because this type of borrowing often comes with high-interest rates, and the electronics typically depreciate in value quickly after purchase. Consequently, if the individual cannot pay off the balance, they may end up in a cycle of debt that is difficult to manage, with no long-term benefit from the purchase.

In contrast, a mortgage for a primary residence, while it is a form of debt, is often considered good debt because real estate can appreciate in value and provide long-term financial security. Personal loans for vacation expenses and student loans for education can also be viewed differently—vacation expenses do not generate future income or appreciate, while student loans can be seen as an investment in one's education, which could lead to better career opportunities and higher earnings in the future.