Credit Card Debt- Why its so bad

In the 21st century credit cards aren’t just a luxury anymore, they are necessary.

As you can imagine, lots of people try to get credit cards. In fact most consumers have more than one credit card. The credit card industry is growing astronomically because of it. Profits are soaring, and everyone is happy.

But, there’s a lurking problem. That’s the problem of credit card debt. It’s not enough just to have a shiny new card in your wallet. You actually have to pay that money back over time, and the credit card companies don’t make that too easy.

And new bankruptcy laws have changed as well in the last few years. It has become harder to file bankruptcy. And leaves consumers very few options to escape their credit card debt. In fact most consumers are forced to honor their debts. Good news for lenders, not so good for consumers with legitimate reasons for becoming delinquent.

Not all credit card debt is bad, but sometimes it becomes a real problem. Let’s see where the problems occur with credit card debt.

Credit cards by their nature offer the consumer the ability to use the credit card for purchases rather than cash. The credit card company will determine a certain amount that the borrower can use, this is the credit limit. Depending on how much you use the card, and how quickly you pay that amount back determines your credit card debt.

Where this becomes an issue is in the payment terms. It looks like free money, but when you have to pay it back, it can become quite disheartening. Depending on the terms of the credit card, a simple $1,000 credit card debt could cost you $3,000 over 10 years to pay it back.

Many consumers are just fine with their credit cards, until something occurs and the consumer misses a payment or two. The penalties and fees can be very severe. The interest rates can go as high as 25-30%, and fees of $30-40 a month are not uncommon. The costs spiral quickly and can become unmanageable.

With proper management of debt though credit cards can be essential for managing life in the increasingly credit dependent world we live in. Just make sure that you manage them properly, and they can work for you too.

Tags: credit counseling, credit card, credit card debt

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