A credit card is a wonderful tool that allows people the resources to ready money when they’re in a bind – and all they have to do is pay it back later. Credit cards can also help people increase their credit scores, which can make obtaining loans and borrowing money even easier.
Credit card debt can also become a serious issue very easily. Here’s how people get stuck with overwhelming amounts of credit card debt:
Small purchases and overspending
Many people have moved away from physical dollar bills and changed to thin plastic cards. They’re easier to carry and use. However, there is a price to pay when using a credit card. In other words, people often don’t accurately judge how much they’re spending and simultaneously experience a false sense of freedom.
Small purchases over a short amount of time add up quickly. If a debtor doesn’t regularly check their purchases, they could end up overspending. Overspending is a habit that is hard to break and can cause massive amounts of debt for people.
Interest fees and minimum payments
Nearly every debtor has to pay interest fees. Interest fees are the price people pay for borrowing money. That’s how the credit card companies make their money.
Unfortunately, many debtors only make minimum payments to their credit cards. When a debtor only pays the minimum payment, the creditor still charges them interest fees. Interest fees and minimum payments can increase unexpectedly and can prolong payments.
Late and overdraft fees
If a debtor doesn’t make consistent payments on their credit cards, they could face late fees. A late fee could be more than the minimum payment and make it harder to pay off debts.
Another example of a fee that can make payments take longer is overdraft fees. If a debtor purchases something that’s more than their allowed credit, the creditor could charge them extra fees. This can trap people into making more payments than expected.
It’s almost impossible to live in this world without debt, and credit card companies know how to make their products alluring – and they do it on purpose. When debt becomes overwhelming, debtors have the option to file for bankruptcy. Debtors who understand their bankruptcy options can make better-informed decisions about their future.