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How do People Get in Credit Card Debt



One can easily get into credit card debt, if he or she uses his/her credit card to buy expensive but generally useless things, or if they sign up for multiple credit cards. However, there are two main types of debt: avoidable and unavoidable.

Avoidable Debt

Using credit cards with excessive interest rates and outrageous late payment penalties is an easy way toward incurring substantial debt. At the same time, one can avoid it by carefully choosing between credit card offers. Avoidable debt also includes the practice of using your credit card at all times, even when cash is in ample supply. Many people donít take the time to calculate how long it will take to repay for a frivolous purchase. Rather than using their credit cards in emergency situations, they pay for vacation tickets, expensive furniture, designer clothes, and all sorts of items they donít necessarily need.

Borrowing in emergency situations

At times, it is impossible to avoid debt. Persons who lose their job or have to pay for emergency medical bills should find a way to cover their expenses. Looking for a new job may take some time while bills are piling up. Parents are in a particularly difficult position as they have to find a way to provide for their children. As another unfortunate scenario, individuals or their close relatives may become ill or get injured. If the medical insurance package does not cover the expenses adequately, debt is easy to accumulate. In case that the medical problem results in inability to work, paying oneís medical expenses is even more difficult without borrowing.

Teenagers are the most vulnerable to credit card debt

Of all groups of credit card holders, teenagers are most vulnerable to credit card debt, because they are too young to know how credit works and have never heard of late payment fees, annual maintenance fees and interest rates. At the same time, credit card companies in Canada and the United States have started attacking high school leavers with credit card offers, even if they are not old enough to get a driving license and have to get their mom or dad co-sign for their cards.

Accumulating credit card debt is a downhill race

What most young people do not understand is that it is incredibly easy to get sucked into credit card debt. At first, they start using their credit card mainly to pump gas in the tank of their cars, thinking that it is fine to pay off just a minimum amount every month. Soon, they find out that it will take them much longer to pay off the credit card debt than to graduate from college. In the worst possible case, teenagers and coeds get stuck with several different credit cards, although they havenít learnt how to manage a simple checking account. So, to help children get used to plastic money, parents may co-sign with them for a debit card or a prepaid credit card with a low credit limit, which will prepare them for their first unsecured credit card later in life.