The article concerns the question – Why Credit Card Debt is the worst kind of debt. Debt is a serious issue for a lot of people, and credit card debt is the biggest problem of all. There is such a thing as good debt, that is debt that is used to increase your wealth, credit cards are not good debt. In fact credit card debt is the worst kind of debt you can have, mainly because it comes with very high interest rates and is almost always used to purchase things that you shouldn’t be borrowing money to pay for in the first place.
The biggest reason for credit card debt to be the worst kind of debt is that it comes with very high interest rates. There are few if any loans available that are going to have interest rates that are anywhere near as high as those that come with credit cards. Many credit cards charge an interest rate that is above twenty percent, at that rate it will be nearly impossible to pay off your credit cards. A credit card makes a lot more sense if you can pay it off in full, or at least most of it every month.
Credit cards are very convenient and in the modern world everybody needs one but with the interest rates they charge a credit card has to be paid off in full every month. Which brings us to the second major problem with credit cards, they are rarely paid off in full. The reason for this is that the credit card companies make it so easy not to pay off your credit card debt.
They know that the longer they can keep you in debt the more money they will get from you so they set the minimum payments so low that if you just pay the minimum you will never get your debts paid off. The minimum payment barely covers the interest, it is designed to keep you in debt for as long as possible and to make as much money for the credit card company as they possibly can.
Credit card debt is also unproductive debt and that may be the worst thing about it. When you take out a mortgage you are borrowing money but it is being used to pay for something that will appreciate in value, it is good debt. Credit cards are used for things like consumer items that quickly lose their value or even worse things like eating out or going on vacation that will leave you nothing to show for your expense.
Most of the things that credit cards are used to pay for are things that should be paid for with cash. The problem is that with a credit card it is very easy to forget that you are in fact borrowing money. If you actually had to take out a loan to go and eat in a restaurant you probably wouldn’t do it, buy that is exactly what you are doing when you use your credit card to pay for dinner.