Credit Cards are no more a luxury, they are almost a requirement. So, you would imagine a large amount of folks going for credit cards. In reality, plenty of people posses more than one credit cards. So, the credit card card industry is growing by big jumps. However, the Visa card industry and credit card holders are posed with a gigantic problem called ‘Credit Card Debt’. In order to appreciate what ‘credit card debt’ really means, we need to understand the workflow associated with the use of credit cards as such.

Credit cards, as the name says, are cards on which you can get credit i.e. make borrowings (your credit card debt). Your Mastercard is a representative of the credit account that you hold with the credit card provider. Whatever payments you make using your credit card are actually your loans that make a contribution towards your Mastercard debt. Your total credit card debt you owe credit card supplier. You should settle your Visa card debt on a monthly basis. So, you receive a monthly statement or your Visa 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 may incur late penalty and interest costs. However, you have the option of making a partial ( minimum ) payment too, in which case you do not sustain late penalty but just the interest charges on your Visa card debt. If you don’t pay off your Visa card debt in full, the interest charges too get added to it. So your ATM card debt keeps on inflating, more so as the interest rates on card debt are sometimes higher than the rates on other sort of loans/borrowings. Further, the interest charges add on to your ATM card debt each month to form the new balance or the new Visa card debt amount. If you continue making partial payments ( or no payments) the interest fees are figured out anew on the new credit card debt. So you end up paying interest on the last month’s interest too. So your credit card debt accumulates rapidly and soon you find that what was once a comparatively tiny Visa card debt has expanded into a massive amount which you find very unlikely to pay. Moreover, if you don’t still control your expenditure habits, your credit card debt rises even faster. This is how the vicious circle of credit card debt works.

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Filed under: Debt Management

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