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Keeping Your Credit Card Debt Under Control
By Trevor Taylor
The fact is, many people posses more than one credit card, and so the credit card industry is growing by leaps and bounds. However, with the growing number of credit cards issued, the industry and holders are faced with a growing problem called 'Credit Card Debt'

In order to fully understand the meaning of 'credit card debt', we need to look at the use of credit cards and how easy it is to abuse them.

Credit cards, as the name suggests, are cards on which you can be given a credit facility, i.e. make short term borrowings, and the balance you owe to the issuer of the card at any one time is your credit card debt. Your credit card is a display of the credit account that you hold with your credit card supplier. Whatever payments you make, or items you purchase using your credit card are your borrowings that contribute towards your credit card debt. Your total credit card is the total amount showing as a balance on your monthly statement.

You are obliged to pay all or part of your credit card on a monthly basis. Each month you will receive a statement showing itemized details of the transactions where you have used the card to either pay other bills or purchase items. Your statement will also note any payments the credit card issuer has received from you since your last statement, together with a balance which you still owe to the issuer, and a minimum payment that you must make by a certain date, in order to adhere to the rules you agreed to when making your credit card application.

Failure to make your minimum payment by the due date shown on your statement will often mean that you will incur a late fee as well as the interest charges applicable for that particular month. The interest charge applied to your account represents a percentage of your balance or credit card debt.

However, paying only the minimum payment is not recommended as you will no doubt not be reducing your overall credit card by any significant amount. It makes more sense to pay off your credit card in full by the due date on your statement each month. Making full balance payments means that no interest charges will be added. Whereas failure to pay off your credit card will cause it to keep growing, and at a speedy rate because the interest rates on credit card are generally higher than the interest rates on other types of loans/borrowings.

Remember also that the interest charges added to your credit card each month will form the new balance on your statement, or the new credit card amount. If you continue to make minimum payments (or no payments at all), the interest charges will be calculated on the new credit card balance. So in effect, you will end up paying interest on the last month's interest too. Therefore your credit card accumulates rapidly and soon you find that what was once a relatively small balance on your statement has ballooned into a much larger amount which you could find almost impossible to pay. Moreover, if you don't keep in control of your spending habits, your credit card rises even faster. This is how the vicious circle of credit card works.

The



pressures created by a growing credit card are enormous, and will often have an adverse effect on your health, your relationships and your personal creditworthiness, and you do owe it to yourself to treat all three with the utmost respect. When your credit card statement arrives at the end of each month, pay off the whole debt. That way your card facility will often cost you zero. Paying just the minimum payment on your credit card is fraught with danger and could cost you dearly.

Trevor Taylor

Trevor Taylor writes of his experiences in the Credit Card and Real Estate arenas.
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