Credit Card Debt refers to a type of debt where the cardholder does not have sufficient funds to cover their account. The credit card company will then allow the debt to accumulate in interest.
How Credit Card Debt Occurs
Some people may incur this type of debt by purchasing items on their credit card and running out of funds before they can make a payment, while others may only need to buy a single expensive item that they cannot afford and pay it off over time.
The most common reason for credit card debt is because a person has taken out a loan with high-interest rates to pay for a higher retail price, such as an expensive car. The borrower will often use their credit card to pay off their smallest monthly payment because the large, expensive payments do not seem so high in comparison.
Another reason that many people have incurred credit card debt is because of an unexpected expense. Some people may have quit their jobs and found that they still need to make student loans or car payments. To do so, they will often use the money that they had saved for other things to pay for their other bills.
Other people may find themselves with credit card debt due to a medical emergency. Some medical bills can amount to up to $50,000 and beyond. Even if a person has health insurance, they may still need to pay a cash deposit before the insurance will pay for their medical bills. This causes many people to take out loans through their credit cards that they cannot afford to get the money that they need.
Conclusion
Credit card debt is very common, and most people will rarely have the money to pay off the full balance each month. However, if one is going through a difficult time financially and has taken out a high-interest loan with their credit card, they may find themselves in over their head. Knowing how to pay off credit card debt can be beneficial while also ensuring that they do not incur more debt in the future.
