Exercising Credit Card Debt Control

by : Trevor Taylor

The fact is, a growing number of people posses more than one credit card, and so, understandably, the credit card industry is growing in 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 comprehend 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 credit i.e. make short term borrowings, and the balance you owe to the issuer at any one time is 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 debt is the total amount showing as a balance on your monthly statement.

You are obliged to make a payment against all or part of your credit card debt on a monthly basis. Each month you will receive a statement showing itemized details of the transactions where you have used your 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 the minimum payment by the date shown on your statement will often result in you incurring a late fee as well as the interest charges applicable for that monthly period. 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 not be reducing your overall credit card debt by any significant amount. It makes more sense to pay off your credit card in full by the due date which appears on your statement each month. Making a full balance payment means that no interest charges will be added. Whereas failure to pay off your credit card debt will cause it to keep growing, and at a speedy rate because the interest rates on credit card debt are typically higher than the interest rates on other types of loans/borrowings.

Remember also that interest charges added to your credit card debt each month will form the new balance on your statement, or the new credit card debt amount. If you continue to simply make minimum the payment (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 debt will accumulate 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 debt rises even faster. This is how the vicious circle of credit card debt works.

The pressures created by a growing credit card debt are huge, and will often have an adverse effect on your health and your relationships, not to mention 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, try to 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