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Factors That Have Contributed To Spiraling Credit Card Debt


Credit card debt is the total unpaid balance on the credit line. There are several factors that contribute to accelerating credit card debt.   

Penalties and interest - one major reason that debt accumulates is due to penalties and interest when the consumer fails to make payments on time. Penalties are charged when the bill is not paid by the due date. Hence it is advisable for the consumer to repay the credited amount immediately. These days, most credit card companies allow you to make several monthly payments online.

“Over- the - limit” fees are another reason debt accumulates. This excessive amount is charged to the account when the consumer exceeds their credit limit. “Over- the - limit” fees continue to accumulate until the balance is paid below the credit limit. Know thy credit limit!

“Universal Default” - The practice of increasing card users' interest rates based on their payment records with unrelated accounts, such as utilities or other credit cards.

 When one of the consumers fails to repay the credited amount or late payment occurs, the credit card company increases the interest rates. These increased interest rates are applied to the consumer with a late payment as well as consumers that pay regularly and on time. This methodology is known as Universal Default. Thus late or non- payment of one particular consumer can hamper the debt amount of other consumers as well. Don’t be a bad apple and cause others to pay for your mistakes.

APR, or annual percentage rate also contributes to the amount of credit card debt. APR is the effective interest rate charged by the credit card company, and paid by the consumer. Annual percentage rates may be increased by the credit card companies. This increase interest can contribute to credit card debt.

To summarize, credit card debt is inclusive of late payment charges, over- the – limit charges, universal default and higher annual percentage rates. 

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