Problem Called Credit Card Debt

Credit cards are no more a luxury, they are just about a prerequisite. So, you would imagine lots of folk going for credit cards. In fact, a large amount of folks posses more than one credit cards. So, the credit card industry is growing by jumps and bounds. However, the credit card industry and credit card holders are posed with a huge problem called ‘Credit Card Debt’. In order to understand what ‘credit card debt’ actually means, we need to understand the workflow related to the use of credit cards as such.

Credit cards, as the name suggests, are cards on which you can get credit i.e. make borrowings (your credit card debt). Your credit card is a representative of the credit account that you hold with the credit card provider. Whatever payments you make using your credit card are actually your loans that contribute towards your credit card debt. Your total credit card debt is the whole amount you owe credit card provider. You have to settle your credit card debt on a monthly basis.

You receive a monthly statement or your credit card bill which shows your total credit card debt. You must pay off your credit card debt by the payment cutoff date failing which you may attract late charge and interest charges. However, you’ve got the option of making a partial ( minimum ) payment too, in which case you do not suffer late charge but just the interest charges on your credit card debt. If you do not pay off your credit card debt in full, the interest charges too get added to it.

Your credit card debt keeps on enlarging, more so as the interest rates on credit card debt are generally higher than the rates on other sort of loans/borrowings. Further, the interest charges add on to your Credit Card Debt each month to form the new balance or the new credit card debt amount. If you keep on making partial payments ( or no payments ) the interest charges are calculated afresh on the new credit card debt.

You end up paying interest on the last month’s interest too. So your credit card debt accumulates rapidly and shortly you find that what was a comparatively a comparatively little credit card debt has expanded into a gigantic amount which you find most unlikely to pay. Likewise , if you do not still control your expenditure habits, your credit card debt rises even quicker. This is how the vicious spiral of credit card debt works.

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