Why Credit Card Debts Accumulate So Fast?
Considering the rapidly growing number of consumers who are deeply drowned in , many people wonder how these types of debts accumulate so fast. Well, there is no secret story. It is just that people usually do not pay attention to the side effects that plastic money comes with; they just count the benefits and convenience that it has to offer. It is true that credit cards make things very convenient, as you do not have to carry huge amount of cash everywhere. But, people often forget that whenever they swap their cards, they accumulate certain amount of debt, which if they do not pay in time will start growing fast because of the high rate of interest charged on it. Following are the two major reasons why these debts grow so fast within a very short period of time.
Paying Just The Minimum Amount
Credit card debts start showing their nasty nature if you are just making the minimum payment required, not paying in full. Most credit card companies offer this convenience to consumers, but that there is a catch. Banks and other financial institutions offer this “convenience” with an objective to encourage consumers to utilize this feature, and when they utilize this feature, their debts start growing fast because of the high rate of interest. The amount of interest on a higher balance will definitely be higher. For most consumers, it soon becomes a financial necessity to pay just the minimum amount and keep using the cards for purchases. People realize only when they get their monthly statements and they wonder how come the debt is so high.
Interest accumulation is another major reason why credit card debts grow so fast. When you do not make the payment in full, a high rate of interest is charged on balances unless you are enjoying a special introductory period without interest. Besides that, if you are doing balance transfer and/or taking cash advances, you are charged an extra amount of interest. When you are charged a certain amount of interest, the amount actually adds to the balance due. It means the next month you have to pay interest on that interest that has already been charged. If such things keep happening with your account, you should not wonder why your debts are accumulating so fast.
Overall, we can see that it is actually the lack of financial discipline that pushes consumers into the deep ocean of . Avoid being extravagant and always follow a budget – when you do that, you will never get into debt at the first place. Learn to live within your means even if a couple of credit cards are lying around in your wallet.