Define Credit Card Debt
- An unsecured debt is when a credit card company issues a line of credit for the consumer to make purchases and withdraw cash from an automatic teller machine. This type of credit usually has a lower interest rate, and a higher initial credit line is issued. The consumer's credit rating is taken into account when issuing this type of credit.
- Another type of credit card debt is secured debt. The secured debt is usually a high interest line of credit issued to consumers who have a low or poor credit rating. This type of card can be a way for a consumer to start over and recover from a poor rating, or it is also issued to consumers who have a higher lending risk due to having too much credit. The secured credit card asks for a deposit and charges an annual fee. The interest rates on this type of credit tends to be very high, and the line of credit starts out small with increases issued over time if payments are made by the due date and the consumer keeps the balance below the limit.
- Excessive credit card debt can have negative effects. The consumer's credit rating and FICO (Fair Issac and Company) score can be affected by missed payments, late payments and delinquent accounts. A lower credit score can make it difficult to purchase cars, homes and other credit-based purchases. If unpaid, credit card companies have taken consumers to court through collection agencies and can leave message on home and work telephones. The effects of paying down credit card debt and keeping a low balance on credit cards can mean increases in lines of credit. Consumers with excellent payment histories usually don't have any problems waiting for an approval to buy new items or investments and sometimes receive preferential treatment above those with less favorable credit.
- There is no specified amount of time that declares how long it will take to pay off credit card debt. In some cases, it could take 30 years or more to pay back the line of credit and the interest to the credit card company. The time for repayment depends on the consumer and how much he contributes. Many credit cards have a 30-day revolving cycle, where the interest is charged based on the daily balance of the credit card. The more the balance decreases, the less interest the company charges.
- Credit card debt exists in most countries around the world. Credit card giants Visa and Mastercard have created a merchant network in numerous countries and lands. It is possible to create credit card debt from purchases made in multiple countries. Purchases made in a country with a lower currency rate can be beneficial to travelers. After the purchase is made, the credit card company will then convert the purchase to the currency rate in which the card was issued. This can be a negative issue when a consumer visits a country whose currency is rated higher than the currency of the consumer's home country.
- Experts research show that the average credit card debt in United States is more than $15,000. The average interest rate is at about 14.67 percent, with 98 percent of American revolving account debt attributed to credit cards. According to CreditCards.com, the experts advise paying the balance in full every month to stay out of debt. Other tips include keeping a low balance and saving a credit card for emergencies only.