Why credit card debt can keep people trapped for years

On Behalf of | Aug 3, 2023 | credit card debt |

For most modern households, credit cards are a financial necessity. Individuals never know when they might need to repair their vehicle or buy supplies for a school project. Credit cards provide financial flexibility by allowing individuals to spend money before they actually have funds in their bank accounts.

Unfortunately, especially when the money spent by a family far exceeds the revenue coming in, credit card debt can quickly become a problem. Most credit cards have very high interest rates, and credit card companies also tend to assess monthly fees for everything from late payments to charges that go over the credit limit for a card. As a result, many people end up trapped in a cycle of ever-accumulating credit card debt.

So-called debt solutions can make things worse

Those struggling to pay off or pay down the balance on their credit cards may look to special systems to achieve their goals. For example, they might work with a credit card settlement company that promises to negotiate a settlement for a lower balance than the total amount due. However, such services often come at a cost and require that someone take out a new line of credit.

Balance transfers can be equally problematic, with lenders often charging fees to transfer the funds and only offering low interest rates for a set amount of time. Those that don’t pay the balance within a specific window of opportunity may end up hit with several years of interest all at once and struggling to pay the remaining balance.

For those who can’t seem to gain traction in their efforts to pay off credit card debt, bankruptcy is one of the only solutions that will actually permanently resolve the matter. When successful, a personal bankruptcy filing will lead to the discharge of what someone still owes their credit card companies and other unsecured lenders.

Although bankruptcy does typically result in the closure of all revolving lines of credit and a drop in someone’s credit score, people can typically secure new credit cards within a few months of their discharge and can rebuild their credit to even better than it was before they filed if they employ a very cautious approach to credit use after the bankruptcy. Ultimately, understanding how credit card debt can leave people feeling trapped may help those worried about how to balance their budget and regain control over their finances to seek solutions that can address the problem for good.