Credit cards are considered a luxury for some, but many see them as a necessity. As you can imagine a lot of people apply for credit cards by the thousands a day. The average person owns more than one credit card. This is causing the credit card industry to grow and leap beyond any one’s imagination. However, the credit card industry and its holders are doomed with one huge dilemma called ‘Credit Card Debt’. For us to understand what this really means, we have to take a look at the work flow that comes with the use of credit cards.

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Credit cards, as the name states, are cards that give you a line of credit i.e lending you the money (your credit card debt). Your credit card is a representative of the credit account that you hold with your credit card company. When you make payments to your credit card you’re actually paying what you borrowed and it’s contributed towards your debt. Your debt is the total amount you owe your credit card company. Most companies make you pay a min. percent of your debt on a monthly basis. When you receive a monthly bill it shows your total credit card debt. If you fail to pay off your debt by the payment due date you will be charged with late fee’s and sometimes even higher interest fees. Many companies give you a choice to pay a partial or minimum of your payment, in which you don’t get hit with late fees but just interest charges on your credit card. Doing so will cause your debt to keep increasing, as interest rates on credit cards are higher then the interest rates on loans. Interest charges add on to your debt every month to give you a new balance which increases your debt. If you continue to only pay the min. balance on your card the interest from last month still hasn’t been paid and you end up paying the previous months balance. This can cause you to go into debt very rapidly and a relatively small balance can land you into huge debt that can be almost impossible to pay. Control your spending to avoid these high debts from occurring.

This entry was posted on Wednesday, May 6th, 2009 at 7:39 am and is filed under credit cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.