Credit Card Debt Explained
Credit card debt is a real problem for a lot of people. The reason that it is such a problem is that once you are in debt it is very hard to get out of it. The credit card companies actually go out of their way to make it as hard as possible. This is why the best thing is to not get into credit card debt in the first place.
Credit card debt is one of the worst kinds of debts that you can possibly have because the interest rates that come with it are so high. There are few loans that you will ever take out that will have interest rates that are anywhere close to the rates that are charged by credit cards. This is a big part of what makes it so hard to get out of credit card debt. With the interest rates that are charged you will probably find that the amount that you owe increases almost as fast as you can pay it off. In fact the credit card companies plan it that way.
If you have a credit card you have probably noticed that the amount that you have to pay each month is only a small percentage of what you actually owe. This is the minimum payment. This isn't the credit card company doing you a favor. The problem with the minimum payment is that it is set so low that it just barely covers the interest. That means that almost your entire payment is going towards paying the interest rather than paying down the amount you owe. The credit card companies know that the longer they can keep you in debt the more money they will make. If you want to get out of debt you have to pay more than the minimum.
The other problem with credit card debt is that most of the time it is bad debt. That is debt that is doing nothing to help you financially. When you borrow money to buy things that will help to increase your net worth that is good debt. Buying a house would fall into this category. The problem is that the vast majority of items bought with credit cards will not increase in value. In fact in most cases they are consumables. You should not be going into debt to make these kinds of purchase. Especially not at the interest rates that are charged by the credit card companies.
One of the reasons that people have so much trouble with credit card debt is that it is just so easy to use your credit card. The result is that most people end up spending far more than they realize. When you pay cash you know exactly how much you are spending. Somehow it is different with credit cards; it just doesn't feel like you are spending money when you use your card. The result is that people go into debt to buy items that they really shouldn't be buying.