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credit card debt explained

Mar 3, 2008
Viewed not so much as a luxury, but more of a necessity, credit cards are now sought after by many people.

The crediting card industry seems to be in a constant state of growth, with many card holders possessing more than one card.

However, the credit card industry and credit card holders are posed with an increasing problem called 'Credit Card Debt'. In order to fully understand what 'credit card debt' actually means, we need to understand the concepts associated with the use of credit cards as such.

In simple terms, credit cards are cards that allow you to borrow money. Credit card suppliers make these borrowed funds available to people by granting them a credit card account.

What you are doing every time that you use your credit card is in essence, borrowing money, and this money, the debt on your credit card account, needs to be repaid to your credit card supplier.

You must settle your credit card debt on a monthly basis. So, 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 due date failing which you will incur late fee and interest charges.

Paying out your credit card debt in full each month will result in you avoiding having interest added to your outstanding debt, which can be a significant saving as the interest rates on credit cards are generally quite a bit higher than on any other kind of loan.

In making partial payments only you end up paying interest on the interest from the previous month, and if you are not careful your credit card debt can increase quickly, making what was once a fairly small amount suddenly balloon into a much larger sum which you may have trouble paying.

Moreover, failure to control your spending habits will result in your credit card debt increasing faster and faster. Placing you in a vicious circle of credit card debt.
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