subject: A Problem Called Credit Card Debt [print this page] Credit cards are no more a luxury, they are almost a necessity. So, you would imagine a lot of people going for credit cards. In fact, a lot of people possess more than one credit card. So, the credit card industry is growing by leaps and bounds. However, the credit card industry and credit card holders are posed with a big problem called 'Credit Card Debt'.
In order to understand what credit card debt actually means, we need to understand the workflow associated with the use of credit cards as such.
An issuing credit card company or bank, will grant a person a credit limit that will enable the person to purchase items with the credit card company's money.
Your credit card debt is what results when you make these purchases. The total amount you charge to your account is the amount of your credit card debt. Payments must be made monthly. The credit card company will issue a monthly statement showing your payment amount and any credit activity that month.
You must pay off your credit card debt by the payment due date failing which you will incur late fee and interest charges. However, you have the option of making a partial (minimum) payment too, in which case you don't incur late fee but just the interest charges on your credit card debt. If you don't pay off your credit card debt in full, the interest charges too get added to it.
So if you just pay the minimum payment each month, the credit card debt you owe will continue to grow. Depending on the interest rate you are being charged on your credit card debt, it can be quite significant.
What's so bad about the credit card debt is that if you don't pay the full amount, you will be charged interest on the interest you were charged last month! It gets to be a never ending cycle.
If you can be responsible enough to pay off the entire balance each month on your credit cards, you will be ok. Its when credit card debt spirals out of control by always making the minimum monthly payment that it becomes a problem.
