Debt and credit

Credit Cards: Beauty and the Beast

Credit Card DebtA credit card is a plastic card issued to individuals by either a bank or credit provider. They can be used to buy goods from online retailers or in-store in the same way that a debit card would be. However, instead of having monetary funds within the account you would have credit funds worth up to an agreed limit. This means that you can buy things on credit so long as the price does not surpass the limit and on the basis that every month you re-pay either some or all of what you owe.

A credit card can be a viable way to borrow money and there are positives associated with using one. By buying things with your card and then re-paying the outstanding balance you can look to build up a healthy credit score. This is because it can be a great way to show lenders how responsible you can be when managing your money. They can also be really helpful in the event of an emergency; especially if you do not have any savings or other avenues to call upon. The assurance that you can simply pay for an unexpected expense without having to worry is a huge relief for many people. Furthermore, the ease of use and instant gratification that the lending nature of a credit card offers is a big attraction.

In this modern era we are constantly bombarded with information about the poor state of the economy. Stagnant wages and increasing rates of inflation are rife; in turn leading to one of the credit card's major downfalls. When all someone can reasonable afford on their wage packet is the basics such as food, shelter, utilities and travel costs it can be tempting to spend on the card to get something that you can enjoy. The problem comes about when it is time to pay off the amount spent on the card and you end up making only the minimum payment as that is all that you can afford. Alternatively you may pay off a greater proportion of what you owe or even all of it, only to then struggle to meet you necessities later in the month and re-spend on the card again.

Another risk of spending on credit cards can be to do with your credit rating. This is due to potential defaults that you make on the card therefore lowering your score and with it, the perception that the lenders have about your ability to manage your finances. This can be emphasised by the high levels of interest rates and charges that are added on to balances when payments are missed.

If credit card debt does feel like a permanent feature within your finances it is easy to simply bury your head in the sand and hope that the problem goes away. In reality this will not happen and you are legally obliged to re-pay the money that you owe. By accessing the support and advice of either a debt support charity or a specialised debt management company you can look to start getting your finances in order with the intention of reducing what you owe.

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