Understanding The True Meaning Of Credit Card Debt

Today possessing a credit card is not considered to be something of a luxury or a status symbol but is seen as a necessity and almosr everybody has not just one but a billfold full of credit cards. Consequently the credit card business has grown by leaps and bounds in recent years and today the marketing of credit cards is also a huge business in itself. But with this growth has also come an immense growth in credit card debt.

As the name suggests a credit card merely permits you credit with the credit card issuer and the limit of that credit will be established at the time the card is issued and reviewed from time to time thereafter. In other words when you use your credit card you are merely borrowing money from the card issuer and you can go on doing so as many times as you wish to until you have reached the limit of your credit.

As soon as you start borrowing money from your credit card company you will begin paying interest on the money you borrow and every month you will be required to pay back at least some of the money borrowed. The rules vary from card to card but, occasionally, the initial interest charged is at 0% and if you pay back the full amount borrowed in any month at the end of that month then you will pay no interest charges on that money. However, if you pay back only part of the debt, you will be required to pay interest on the remainder of your borrowings until that money is paid back. Interest also varies of course, but it is common to find that you are paying double figure interest rates which can frequently run to more than 20% annually.

Of course as long as you are sensible and only make use of your credit card for convenience when you are out shopping and then pay off the full debt each month then you will be fine. However, the majority of people do not use a credit card in this way and a high number of people make only the minimum payment every month, which is often about 10% of the outstanding debt. However herein lies the true danger with credit card debt.

As the months pass you continue spending so that your debt increases but repay only the minimum required, which also grows every month. but, because interest charges are added to your credit card account every month, your account balance actually grows at a faster rate than you are spending and this really starts to rocket after only a few short months as you are also paying interest on the interest which is added to your account every month. Naturally what happens all too often is that the minimum payments become more and more difficult to meet and all too soon you are merely meeting the monthly interest charges which are being added and not paying back the money that you have actually borrowed in the first place.

As long as you use them properly credit cards can be extremely useful but, if you do not use them correctly or do not understand exactly how they work, then your credit card debt can spiral out of control in no time at all.

So, before you begin running your credit card account up to its limit and find yourself needing help with debt problems ensure that you understand exactly how your credit card works. And, if you have already overreached yourself then do not delay when it comes to asking for help in settling credit card debt.