Credit Card Debt

Remember when everyone paid for things in cash? Probably not.

Credit cards are no longer considered a luxury, but rather, a necessity. So as you can imagine, a lot of people are going into debt with credit cards. Many people posses more than one credit card. The credit card industry is growing by leaps and bounds. However, both the credit card industry and credit card holders are posed with the problem of credit card debt. In order to understand what credit card debt means, you need to understand the workflow associated with the use of credit cards.

Credit cards, as the name suggests, are cards with which you get credit (the ability to borrow money). Your credit card is represents the credit account that you hold with the credit card supplier. Purchases you make using your credit card are actually amounts of money you are borrowing. This contributes towards your credit card debt. Your total credit card debt is the total amount you owe your credit-card supplier.

You are required to settle your credit card debt on a monthly basis. You receive a monthly statement or bill which shows your total debt. You must pay off your credit card debt by the payment due date. failing to do this will incur late fee and interest charges. However, you also have the option of making a partial (minimum) payment, in which case you don't incur a late fee -- just the interest charges on your debt.

If you don't pay off your credit card debt in full each month, the interest charges get added to amount. Your credit card debt keeps increasing (more so than on other types of loans because the interest rates charged by credit cards are generally higher). Further, the interest charges plus your credit card debt from the prior month form the balance for the next month.

If you continue making partial payments (or no payments), your interest charges are calculated afresh on the next credit card bill. You end up paying interest on the last month's interest, too. Thus your credit card debt rapidly accumulates, and you find that what was once a relatively small credit card debt has ballooned into an amount you find almost impossible to pay. Moreover, if you don't control your spending habits, your debt will rise even faster.
This is how the vicious circle of credit card debt works. Don't put yourself in this position. Don't make any purchases on your credit card that you can not afford to pay in full when the bill comes.

Author: William Jones