by Michael Perrin

Though difficult to believe now, at one time many years ago credit cards were a luxury, owned and flashed around only by the rich and famous or businessmen on a magnanimous expense account. (Years later the same flaunting by the same beautiful people was to be made with mobile phones - strapped conspicuously to the belt remember?).

Be that as it may, nowadays both these accoutrements are no
longer luxuries; in fact they have become necessities of daily
living. And along with them - or at least with credit cards -
has come a rather nasty little problem, to whit ‘credit card
debt’. If we are not too careful it tends to steal up on us
unawares, to make itself painfully obvious on a regular monthly
basis.

What is it and whence does it come? To answer this we need to
know what happens behind the scenes, behind the counter of the
bank or card provider. Your credit card merely represents the
account you have with the bank or supplier. Whenever you use it
to buy that latest laptop or pay for an expensive dinner or
whatever you are actually borrowing that money from the bank and
the bank will remind you of these payments, or borrowings, at
the end of the month. The chickens - as chickens are wont to do
- have come home to roost.

And these payments, aka borrowings, are what contributes to your
credit card debt. Quite simple isn’t it. Not exactly rocket
science although if you let things slide it might need rocket
science to get the situation back on the right track. But of
course you will not let that happen will you? You may not but
thousands do though. And therein lies the scourge of the
ubiquitous credit card.

So, you pay the amount on your monthly statement by the due date
and you pay no interest. However, if you have been a bit
careless with your spending during the month, you may not be
able to pay the amount so you will incur a late fee and lefty
interest charges. Or you may be able to pay a little of this
debt. That’s better than nothing - the bank will not charge a
late fee, just the interest on what has not been paid off.

So far so good. Some left still to pay, with interest accruing,
at the end of the next month. When, oh dear, a bad month, a bit
short again so you can only pay part of the debt again. And the
next month - only part of it again…

So your credit card debit, like Topsy, grows. And grows .If you
continue making partial payments (or no payments at all) the
interest charges are calculated afresh on the new credit card
debt. So you end up paying interest on the last month’s interest
too.

A nasty looking circle is forming, made even nastier by the
extortionate interest rates that are charged on credit cards.
This interest is far greater than the interest on most other
loans that the bank may make Thus your credit card debt
accumulates rapidly and soon you find that what was once a
relatively small credit card debt has ballooned into a large
amount which you might very well find almost impossible to pay.

Further, if you don’t still control your spending habits, your
credit card debt rises even faster. This is how the vicious
circle of credit card debt works.

The moral is obvious isn’t it? Cut your spending, leave your
card at home and go back to using that old fashioned green paper
stuff

Though difficult to believe now, at one time many years ago credit cards were

About the author:
Michael Perrin
www.felicitasio.com (loosely translated as ‘Oh frabjous day’) for more musings on the ubiquitous credit card and gateway to the ‘Credit Secrets Bible”

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