Credit card debts are one of the common things found in America. According to the statistics from Experian Credit review, nearly 95% of adults have credit card debt in America. Particularly new card users have a high chance of risk for credit card debt. You can ask for help from the credit card issuer to resolve the credit card debt
Falling into the temptation of credit cards creates a credit card debt. Also carrying more than one card seems to be a little bit difficult to manage. As interest is being added to the standing balance credit card debt becomes worse.
Table of Contents
1) What are credit card debts?
A credit card is a payment tool that you can use now for the payment and pay later to the credit card company. There is always a credit limit for your account. You need to use this credit card within this limit.
At the end of the month, you are provided with a credit card statement. It consists of details that how much you have speed on those billing days? And how much do you need to pay in that month?. There is a due date within which you need to pay these bills. When you skip the payment you are charged with late fees also you need to pay the interest for the past month.
This term is known as standing balance. When you use your credit card with a standing balance interest keeps on increasing. In this way, credit card debt is made. It makes you pay more and more amount as the interest is compounded monthly or daily.
2) What are the reasons for credit card debts?
We can’t say there is only one reason for the credit card debt. Several factors have played a vital role in making credit card debt. Listed below are some of the common reasons for credit card debts.
2.1) Temptation trap
One of the most commonly falling traps by using a credit card is temptation. When you buy a new credit card you are tempted to spend more, as you have more borrowed cash in your card. Unconsciously you will fail to maintain financial habits. It will surely result in credit card debt.
You will come to know that you have spent more than you afford only at the time of looking at your credit card statement. You will struggle to pay the bill within time. So you are charged with an interest rate.
In this way, your credit card debt goes higher. This is a research-proven fact that “People spend more using credit cards than using the cash”. You didn’t have a conscious of losing money while using credit cards than in cash. Credit card companies mostly earn profit through your credit card interest.
2.2) Interest Trap leads to credit card debts
As said earlier interests are the potential source that leads to credit card debt. Whatever may be the amount whether it may be a partial payment or the minimum payment you will surely charge interest for the remaining outstanding balance.
The interest rate may vary from 3% to 6% depending upon the banks. For example, HDFC Bank Credit card carries an APR of 40.80% which means, it has a monthly interest of 3.40%. Only a few credit cards carry 0% interest. In this way interest charged by the credit card company makes the situation of credit card debt even worse.
2.3) Standing balances
You have heard the statement that the payment of the minimum amount is more than enough for a credit card bill. It is a better option if you run out of money or if you are undergoing any financial struggles.
Otherwise, it will certainly lead to credit card debt. As said earlier if you would pay your bill after the due date you would need to pay interest for the entire billing period. If you make any partial payments and have a standing balance you would need to pay interest for those standing balances at the time of paying next month’s bill.
If you miss out on the payment or left the balance unpaid even after two credit bills, then you are going to pay interest for the unpaid interest. In this way, credit card debt goes on increasing.
2.4) Failed to manage credit cards
Whether it is a new credit card user or a long-term credit card user, sometimes they would have confused by credit card terms. Also, a person having two or more credit cards find it somewhat difficult to manage it. This may lead to missing the payment within the due date.
People who are having two credit cards have a higher possibility of running into credit card debt with both cards.
3) How to get rid of credit card debts?
By credit card debt you will not face only financial struggles, you will get into the mental depression that you have no chance of making any present payments. You need to take the particular amount from your income for the payment of credit card debt. If the debt is high your income is needed to be fully taken for credit card debt.
Below provided some of the action steps to get rid of credit card debt
3.1) Be conscious that you are owing
Whenever you are swiping the card be conscious that you are using borrowed money. It is entirely possible to be free of credit card debt. you should maintain strict financial habits while using credit cards. It is advisable to use credit cards within the 30% limit of your credit card limit.
3.2) Use the short-term loans feature
It is ok to be getting into credit card debt. After that, you could verify the possible ways of being debt-free. For that one of the smart ways is getting short-term loans from the banking institution and paying the bills in full payment. This makes you debt-free and also interest-free.
Or make any repayment plan. Limit your daily spendings while you are in credit card debt. Ask your credit card issuer to reduce the interest rate if possible. Don’t use the credit card again while in debt.
3.3) Think of your credit score
As said earlier credit card affects the credit card score badly. This would reduce your borrowing power in the future. You can’t easily get a housing loan, car loan, etc… So while spending using credit cards think twice before spending. try to learn how much should you pay on your credit cards? to avoid credit card debt.
If you are having more than one credit card and having debt on both cards. Then try to pay the credit bill which has higher interest. This will reduce your debt burden.
Hereby concluding that always be cautious while using the credit card. Try to pay the full amount mentioned in the credit card bill. It is the best way of being debt-free. Maintain a good credit score without being debt. Even though you are in debt try to sort out the debt using your own repayment plans based upon your income.
You are initially charged late fees and then interest for the standing balance. If you continue to miss the payment, your account will be frozen by the credit card issuer.
When you fail to pay the credit card debt, the credit card issuer will pass your debt to the debt collector. He was instructed to collect the debt. If you even ignore the debt collector, they will place a lawsuit against you.