Credit cards are no more a luxury, they are just about a prerequisite. So, you would imagine lots of folk going for credit cards. In fact, a large amount of folks 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 large problem called ‘Credit Card Debt‘. To realise 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 debts that contribute towards your credit card debt. Your total credit card debt is the whole amount you owe credit card supplier. You must settle your credit card debt on a monthly basis.

You receive a monthly statement or your credit card bill which shows your total credit card debt. You may pay off your credit card debt by the payment payment date failing which you may attract late penaltiy and interest charges. However, you have the choice of making a partial ( minimum ) payment too, in which case you do not attract late penaltiy 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.

Your credit card debt keeps on enlarging, more so as the interest rates on credit card debt are typically higher than the 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 figured out anew on the new credit card debt.

You end up paying interest on the last month’s interest too. Therefore your credit card debt accumulates rapidly and soon you find that what was once a relatively small credit card debt has expanded into a big amount which you find most unlikely to pay. Moreover, if you don’t still control your purchasing habits, your credit card debt rises even quicker. This is how the vicious spiral of credit card debt works.