Drop in revolving debt a good sign

Eraser rubbing out the word

Debt is always bad. Right?

In reality, debt is practically unavoidable. Most of us couldn't buy a home, a new car or even pay for college tuition without the help of a lender.

Financial experts would describe this type of debt as "good" debt.

To avoid any confusion, let's point out that debt of any type limits your ability to save and invest. With that being said, there are some debts that threaten your financial stability more than others.

Credit cards are the No. 1 source of bad debt. If you've ever found yourself owing the credit card company thousands of dollars, you already know how costly a mistake this is.

But as the economy improves, we might be doing a better job of paying off our credit cards. While some reports indicate banks are writing off a lot of credit card debt, there's no doubt we owe less than we once did. And the American Bankers Association said bank-issued credit card delinquencies dropped in late 2010 to the lowest level in almost a decade.

"When people have jobs, they can spend more and pay their bills on time," says ABA Chief Economist James Chessen.

The decline in credit card debt levels and delinquencies are a good sign consumers have curbed spending and are managing their finances better.

The economy itself may be contributing to the change in debt levels. Still feeling the sting from the recession, consumers are less willing to carry unnecessary debt.

Despite this, consumers appear to be willing to take on long term debt in the form of mortgages and student loans.