Problematic Plastic Money

Problematic Plastic Money



Problematic Plastic Money
Credit cards are no more a​ luxury,​ they are almost a​ necessity .​
So,​ you would imagine a​ lot of​ people going for credit cards .​
In fact,​ a​ lot of​ people posses more than one credit cards .​
So,​ the​ credit card industry is​ growing by leaps and bounds .​
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​ workflow associated with the​ use of​ credit cards as​ such .​
Credit cards,​ as​ the​ name suggests,​ are cards on​ which you can get credit i.e .​
make borrowings (your credit card debt) .​
Your credit card is​ a​ representative of​ the​ credit account that you hold with the​ credit card supplier .​
Whatever payments you make using your credit card are actually your borrowings that contribute towards your credit card debt .​
Your total credit card debt is​ the​ total amount you owe credit card supplier .​
You must settle your credit card debt on​ a​ monthly basis .​
So,​ you receive a​ monthly statement or​ your credit 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 will incur late fee and interest charges .​
However,​ you have the​ option of​ making a​ partial (minimum) payment too,​ in​ which case you don’t incur late fee but just the​ interest charges on​ your credit card debt .​
If you don’t pay off your credit card debt in​ full,​ the​ interest charges too get added to​ it .​
So your credit card debt keeps on​ increasing,​ more so because the​ interest rates on​ credit card debt are generally higher than the​ interest rates on​ other kind of​ loans/borrowings .​
Further,​ the​ interest charges add on​ to​ your credit card debt each month to​ form the​ new balance or​ the​ new credit card debt amount .​
If you continue making partial payments (or no payments) the​ interest charges 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 still control your spending habits,​ your credit card debt rises even faster .​
This is​ how the​ vicious circle of​ credit card debt works.




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