Credit Card Debt
Credit cards have been considered to be a luxury in the past but have in recent times become more of a necessity for people around the world. People nowadays depend on credit card more than before and almost all of them possess one credit card for sure.
Now, 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 how credit cards actually work-- away from the point of sale.
Credit cards are used by people to purchase things on credit, which means one can purchase things without having to pay for them upfront. The credit card represents the credit account that a person holds with the firm issuing the credit card. The more you use your credit card for purchasing items it adds to your credit card account, thus creating your credit card debt.
The total amount that is owed by a credit card holder to the credit card supplier adds up to be the total credit card debt, and needs to be paid back every month. Due to this the credit card suppliers issue monthly statements to the credit card holders and they are expected to pay back their dues within a particular date. Any delay in payment would result in the person having to pay extra money in terms of late fee and interest charges.
There is an option of making partial payments for clearing the credit card debt that people can avail. However this proves to be disadvantageous for the people as they would be paying back higher interest rates, thus increasing the amount of their credit card debt. The only advantage is that they will not attract any late fee.
Furthermore, the interest charges added on to your credit card debt each month form the new balance or the new credit card debt amount, and interest is charged on the previous month's interest. If you continue making partial payments (or no payments) the interest charges (and late fees) 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 control your spending habits, your credit card debt rises even faster. This is how the vicious circle of credit card debt works. - 23305
Now, 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 how credit cards actually work-- away from the point of sale.
Credit cards are used by people to purchase things on credit, which means one can purchase things without having to pay for them upfront. The credit card represents the credit account that a person holds with the firm issuing the credit card. The more you use your credit card for purchasing items it adds to your credit card account, thus creating your credit card debt.
The total amount that is owed by a credit card holder to the credit card supplier adds up to be the total credit card debt, and needs to be paid back every month. Due to this the credit card suppliers issue monthly statements to the credit card holders and they are expected to pay back their dues within a particular date. Any delay in payment would result in the person having to pay extra money in terms of late fee and interest charges.
There is an option of making partial payments for clearing the credit card debt that people can avail. However this proves to be disadvantageous for the people as they would be paying back higher interest rates, thus increasing the amount of their credit card debt. The only advantage is that they will not attract any late fee.
Furthermore, the interest charges added on to your credit card debt each month form the new balance or the new credit card debt amount, and interest is charged on the previous month's interest. If you continue making partial payments (or no payments) the interest charges (and late fees) 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 control your spending habits, your credit card debt rises even faster. This is how the vicious circle of credit card debt works. - 23305
About the Author:
Are you a credit card user and willing to know how exactly the credit card works? Then here is a website http://www.weknowthewayback.com from Don Burnham which explains you everything about Credit Cards.
posted by Mr. Forex at
4:10 AM
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