Credit card debt can be best described as an unsecured liability. It is incurred through credit card loans that are not paid off on time. Borrowers accumulate credit card debt by opening different credit card accounts with differing credit card limits. All the credit card accounts of a borrower are reported and tracked by various credit bureaus in the country. A large chunk of the outstanding debt that is reflected on a credit report is mainly credit card debt.

This occurs because these credit accounts keep revolving and stay open indefinitely. Let’s break down the details of credit card debt:

1. Benefits of credit card debt

Credit card debt can actually be used for the benefit of borrowers in some cases. For instance, if a borrower is seeking to purchase items and services that give them the provision of deferred payment over time, then credit card debt may actually be a positive aspect. Even so, this debt carries some alarming interest rates in today’s industry. However, the battle is not lost if you do get into credit card debt. You still have the option of paying off the balance every month in order to save up interest over the long term.

2. Drawbacks of credit card debt

Generally the word debt does not have a positive connotation. So, it is quite evident that even credit card debt comes with its fair share of drawbacks. Here are some of them that you should know in order to avoid getting into this type of debt:

3. Hefty fees and high interest rates

Credit cards work on the principal of high interest. When you get in debt, it becomes a vicious cycle. You pay high amounts of interest on your credit card, making it tough for you to clear off the balances. If you hold multiple credit cards, then the cumulative fees are very high, making it tough for you to keep up with credit card charges.

4. A huge impact on your credit score

Your credit score is evaluated based on the number of credit cards you hold and your ability to pay the balances on time. If you do get into credit card debt, then it will reduce your credit score, making it tough for you to procure loans at a good rate in the future.

5. Disrupts your financial goals

Any kind of debt, especially high interest liability like a credit card debt, can disrupt your financial planning. It is an unforeseen expense that most people do not consider. Hence, we recommend that you keep your credit card expenditure in check. The longer you stay in debt, the longer you are unable to realize your dreams, such a owning equity.

All of the aforementioned disadvantages are sufficient reasons to keep you financially disciplined. It is advisable to not fall in the luring trap of credit cards. If you plan things well enough, you will be able to use them to your advantage and avoid credit card debt.