Credit Card Debt Can Be A Grave Concern

Everyone needs a credit card, as gone are the days

, when they were considered to be a luxury. In today's world, everyone needs a credit card and therefore, they are a necessity. Most people have more than one card on their name. This is a major reason why the industry is growing at a phenomenal rate. But, the flip side to this is the industry and the people with cards are stuck with a grave concern called 'Credit card debt'. If you want to gain insights into the exact nature of credit card debt, then look at the way the cards function.

Credit cards allow you to avail credit. That means that you can go on and borrow money on your credit card. This gets included in the credit account that you have with the credit card provider. Every time that you swipe your card for payments, you add up to the borrowings made and this goes towards increasing your credit card debt. The sum total of the credit debt is all the money that you have to repay the credit card supplier. This debt needs to be repaid regularly every month. The credit card supplier sends you a statement which has information about the amount that you need to pay. In case, you fail to pay the amount mentioned, then a late fee and interest is levied on the amount that you own.

In case you can't pay up the entire amount, you can opt to pay a little bit, possibly the bare minimum. This will keep the late fee at bay but will continue to levy the interest charges on the card debt. If you aren't in a position to even pay up the minimum amount on the card debt, then both, the interest and the late fees are levied. This pushes you into a vicious cycle wherein your interest payable on the credit card debt gets more and more. The interest rate on a credit card is higher than on other loans and borrowed money. The interest, added to the principal amount that you have borrowed results in the new amount, which is then taken to calculate the next month's rate. If you make a part of the payment on the credit card debt then that amount is deducted and the remaining added on to the principal amount due.

Therefore, when you look at it carefully, you are not only paying the principal amount borrowed but, the mounting interests from the previous months as well. What ultimately happens is that your debt goes on increasing over a period of time. A small amount borrowed once has now become a mammoth one staring you in the face. This amount might be way beyond your payment capacity. Furthermore, if you don't take your spending habits into control the card debt may spiral high at the fastest of rates and spin out of proportion pulling you further down into the never ending credit card debt cycle.

by: Robert Carleton

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