Credit Card Debt Problem

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 card debt.
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. College Students & Credit Card Debt