Credit cards are no longer a luxury, they are virtually a necessity. So, you'd imagine a lot of men and women going for credit cards. In reality, a lot of individuals possess more than one credit card.
The credit card industry and credit card holders are posed with a huge problem called 'Credit Card Debt'. As a way to understand what 'credit card debt' actually means, we have to understand the work flow associated with the use of credit cards.
Credit cards, as the name suggests, are cards on which you'll be able to get credit. Your credit card is actually a representative of the credit account that you hold with the credit card provider. Whatever payments you make using your charge card are actually your borrowings that contribute towards your credit card debt.
Your total credit card debt will be the total amount you owe to the credit card supplier. You should settle your credit card debt monthly. So, you receive a monthly statement or your credit card bill which shows your total credit card debt.
You need to pay off your credit debt by the payment due date. Any time you fail to do so, you will incur late fee and interest fees.
However, you've the option of making a partial (minimum) payment too, in which case you don't incur a late fee but just the interest charges on your credit debt. If you do not pay off your credit card debt in full, the interest charges get combined with it.
So your credit card debt keeps on increasing, more so because the interest rates on credit card debt are generally greater than the interest rates on other types of loans/borrowings. Further, the interest charges are added to your credit debt every 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 added on top of the new credit debt. So you end up paying interest on the previous month's interest too. Thus your credit debt accumulates rapidly and soon you find that what was once a relatively small credit card debt has ballooned into a huge amount which you find nearly impossible to pay.
Moreover, if you do not control your spending habits, your credit card debt rises even quicker. This is how the vicious circle of credit debt works.
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