Credit card debt is often a result of something else in life. For many people, spending money is a release of sorts. Perhaps a type of social validation. Who knows?
Whatever the cause, be it the latest gadget, a trip, clothes, dining out or whatever else, it is a desire to live a more expensive lifestyle than we can afford.
As I am sure you can imagine, and I have discussed at some length on other pages of this site, spending more money that is earned is a surefire way to the poor-house. Until and unless this extravagant spending is reigned in, there is no real solution for an individual and his or her debt problem. It will only escalate.
This of course is self defeating. The lending procedures of the credit card companies enable this behavior to grow almost exponentially.
As you borrow more debt that you are struggling to afford, they raise your limit and allow you even greater amounts of credit card debt. I can only presume that the lenders work on a principle similar to musical chairs. In other words, when it all collapses for this individual, as long as we aren’t the last ones left and we have been largely repaid, who cares?
“Now is the best time to start decreasing credit card debt!”
As people borrow and refinance their cards to help them pay each month, the earlier cards are likely to be repaid by later cards. If the lender is able to get out of the game near to the end, why worry…
Of course, that isn’t much help for you with a credit card debt hanging over you as the vultures start to circle.
And, if you are charging 18% or more per year for lending money, when interest rates are below 5%, it isn’t as if you should worry too much!!
However, there are other forces adding to the woes of a borrower. The first is compound interest. Over time, the effects of adding unpaid interest onto unpaid interest are very significant.
The other major force is that of the minimum payment. Many people seem to think that by making the minimum payment on a credit card they will, one day completely repay the debt. That is technically true. But, it will take soooooo long that most of us will not live to see it. Read more about managing personal debt.
To actually repay a credit card, significant over payments will be required.