A problem called ‘Credit Card Debt
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 posses more than one credit cards. 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.
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 supplier.
Whatever payments you make using your credit card are actually your borrowings that contribute towards your credit
Your total credit card debt is the total amount you owe 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. 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 your credit
card debt keeps on increasing, more so because the interest rates on credit card debt are generally higher than the
interest rates on other kind 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 continue making partial payments (or no payments) the interest charges are calculated afresh on the new
credit card debt. So you end up paying interest on the last month’s interest too. Thus your credit card debt
accumulates rapidly and soon you find that what was once a relatively small credit card debt has ballooned into a
big amount which you find almost impossible to pay. Moreover, if you don’t still control your spending habits, your
credit card debt rises even faster. This is how the vicious circle of credit card debt works.
Credit in Minutes Tip #1
Stay on top of your credit report. Most credit reports contain errors. Make sure you check your credit report
every year (you get one free credit report every twelve months) and if there are errors make sure to challenge them
with the reporting credit agency. Credit agencies are required to investigate each and every challenge that gets
Credit in Minutes Tip
Just because you qualify for all of those credit cards does not mean you should get them. A person with too many
credit cards looks sketchy in the eyes of a potential creditor. Think of it this way: if a person is financially
stable does he or she need ten different credit cards? Wouldn’t just one or two suffice?
Credit in Minutes Tip
The best way to raise your credit score is to make all of your payments on time. It sounds too simple to be
true, but that’s all there really is to it. Staying out of debt and/or making all of your debt payments on time
will keep your score up where it should be.