Why Do We Fall Into Credit Card Debt Trap

The alarming rise in credit card debt is causing sleepless nights of a good number of people in USA.

Over- borrowing, late repayment and, slack financial discipline not keeping track of credit reports might come as the most important reasons to the average mind. Why do we fall into credit card debt trap? But, do we know the most important factors? Too Many Credit Cards. This article takes a look at the three biggest factors that drive a person towards credit card debt. Many believe having too many credit cards in the wallet is an essential sign of prosperity. But, both of these facts are clearly false, and having too many credit cards is the number one factor that drives a person towards credit card debt.

Some think, the larger the number of credit cards the more money is at their disposal. The hard fact to remember is that every single penny used from credit card has to be repaid and that too with interest. With the repayment dates varying with the credit cards the repayment of credit card debt becomes messier and difficult to keep track of. So, too many credit cards translates into too many credit card debts. Eventually, credit card debt consolidation comes into picture which consolidates the various debts into one. Taking Cash Advances.

To avoid credit card debt the first thing to keep in mind is to have only those credit cards which are absolutely essential. The second most important factor that leads to credit card debt is taking cash advance from credit cards. The simple reason that should stop a person from taking cash advances is that credit card companies charge heavy interest rates on cash advances and there is a penalty also to be paid. Credit cards are there to make payment for goods and services and should not be used as debit cards. The high interest rates makes the repayment scenario more tougher. If it is totally unavoidable, try to repay the cash advance with the very next monthly installment.

Simply speaking the cash advance using a credit card must be avoided at all costs because it is a very high interest debt. This will save a lot of money on interest rates and help avoid falling into credit card debt trap. People think that by repaying the monthly minimum they are doing their part towards paying the credit card debt. Repaying the minimum. But, this is simply not the case. And coupled with high APR this amount can throw a person into debt trap.

By paying only the monthly minimum the credit card debt starts accumulating at a rapid rate. Those who pay only the monthly minimum land up paying 3- 10 times the money they borrowed. This will help establish a good credit history too. The credit card debt can be avoided if the entire amount due is paid with the next billing cycle. Though there are other factors, annual fees, like apr, balance transfers etc. which should not be overlooked while taking a credit card but keeping a track of these three important factors will help a person stay away from credit card debt.