What's the Big Deal about Credit Card Debt?

Credit cards are the first and easiest credit a person can obtain as soon as they are old enough to commit to a contractual agreement (usually at 18). Credit card debt is also the fastest and easiest way one can find himself drowning in a sea of fees and finance charges that will haunt him for years to come.  

New Credit Card Holders

The first credit card definitely has a sort of an allure about it. It's attractive and shiny, has his name embossed across the front, and lots of numbers that some even try to memorize, as if it's a status symbol. Credit card holders start out small, perhaps buying an album or two or a new pair of shoes. They even pay off their credit card debt in full at the end of the month just as they have been told (or advised) to do by their parents and other family members.

Increase in Credit Limit

As a bonus for paying bills on time, the company issuing the credit card will notify the holder that they have increased the limit on the card. Now, instead of a $500 limit (which they never used in full, and therefore found it relatively easy to pay off in a month's time), they are given a new limit of a $1000.

How Credit Card Debt becomes a Problem

Again, after six months of continuous payments and spending, the financial institution doubles the credit limit. Wow! Now the unsuspecting young consumer feels like there is nothing he can not do. Soon it is spring break and he offers to charge the tickets. He says he'll collect cash from everyone who owes it to him, and be able to pay it off in a month. Sooner or later, someone doesn't have the money for the ticket, and instead of paying the whole balance, he pays the minimum.

Credit Card Debt is all Consuming

He realizes for the first time that there is a 15-day grace period to get the money in without penalty or interest, so he is counting those days. Finally, he has waited 10 days and gets the last payment and sends a check. But the 15th day is a Friday and the payment doesn't get recorded until Monday. Not as late as it could have been, but he is starting a pattern that will only get worse.

The Answer

The answer to 95 percent of credit card debt is to not use a credit card unless there is an emergency. As an alternative, use a debit card and avoid payment over time.

If you have a history of repeatedly getting into a financial pinch, a way of bringing ongoing financial responsibility into your life, if you're familiar with twelve step programs, can be found at Debtors Anonymous.

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