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Credit card debt may be avoided by knowing how credit cards work

Young adults in New Jersey may apply for credit cards with the intention of building a credit rating that will benefit them when they need to apply for mortgages, car loans or other lines of credit. Unfortunately, the marketing by credit card companies typically underscores the card's benefits, such as traveling miles, exclusive discounts and other advantages, while the negatives about credit card debt are buried in the small print. To avoid overwhelming credit card debt, knowing how credit cards work is vital.

There is nothing wrong with college students getting credit cards as long as they recognize the importance of paying the full amount every month. Starting out with a first credit card, the consumer may not have an established credit score, and, for that reason, the initial credit limit may not be high. As the person shows that he or she can responsibly manage a credit card, a higher credit limit may be requested.

Credit card debt is similar to a short-term loan, but it is subjected to much higher interest rates. A new applicant will benefit from understanding the card's APR (annual percentage rate). Interest can accumulate at a rapid pace if the cardholder fails to pay the full amount every month. Any balance that is rolled over to the next month will accrue even more interest, and the consumer will have to make the minimum payment to avoid late payment fees.

Some New Jersey consumers may have endured unanticipated hardships such as medical expenses or employment loss. It may be difficult to keep credit card payments current during such difficult times. This can grow into a mountain of debt in a short time, and creditor harassment and other consequences will soon follow. Fortunately, the U.S. Bankruptcy Code offers the opportunity to have unsecured debts such as credit card debt to be discharged in Chapter 7 or Chapter 13 bankruptcy.

Source: forextv.com, "What I Wish I Knew Before Opening A Credit Card", Sept. 21, 2016

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