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All About Credit Card Debt

All About Credit Card Debt

Credit cards are such a common part of our daily lives, that it’s hard to imagine that someone wouldn’t know what credit card debt is. The truth, however, is that the majority of Americans don’t carry a balance on their credit cards, and it’s estimated that nearly 20% of people don’t have even have a credit card. People with credit card debt, however, often discover too late that this is some of the hardest debt to get paid off.

Credit Card Debt is New.

Many people who were born in the 1980s or later are surprised to learn that credit cards are a relatively new financial product. The earliest credit cards were issued by banks to only their best customers, and the process for applying was very similar to getting a mortgage. This meant that only people with excellent credit could get what were known then as charge cards. In many cases, customers were allowed to only charge up to a predetermined limit, then they were required to pay the card’s balance in full at the end of the month. If they did not, they were charged a penalty and were subject to having the card taken away.

Within several years, however, a few large companies determined that offering credit cards to mass market consumers was a much more profitable use for the cards. In order to make sure that the cards were paid, however, they made everyone pay interest on their purchases. This allowed consumers to continue putting charges on the card as long as they paid the minimum required payment plus the interest.

Credit Card Debt is Now Common.

Today, it seems that just about everyone has a credit card. Banks and credit card companies have made them available to just about every adult, including those with poor credit and little income. To make sure that they don’t lose money, banks charge interest rates on these cards that correspond to how large of a credit risk they believe a customer to be.

As soon as a person is unable to pay the charges they have made on their credit card during their billing cycle, the charges convert into a loan at a predetermined interest rate. Customers are able to make a minimum payment that is typically three percent of their total balance, then forgo paying the rest of the debt until the next billing cycle. Of course, interest is charged on the remaining balance.

Unfortunately, many people with credit card debt quickly find themselves in a cycle where they are paying mostly interest every month and making very little progress towards actually paying off the debt. In these cases, a consumer has to make changes to his or her budget in order to get the cards paid off.

About Author: Debt Help Desk

There are tons of sites and articles about getting out of debt. We are different because we are not a site owned or operated by an actual debt relief company. No bias. Our agenda is to help people make smart debt relief decisions- Now let’s help you.

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