Understanding Debt

Get the insight to understanding bad debt

Credit cards have become such an essential part of our lives that we can’t imagine what we will do without them.  Not only do they offer convenience but also the facility “buy now pay later” which means we can purchase and use commodities without spending our own money, and make actual disbursement at any subsequent time at our leisure.  In effect, we enjoy free credit for a certain time. 

We can make a payment of the minimum amount due and carry forward rest of the credit.  Of course, we will be charged interest on the amount we do not repay by the billing cycle date of the credit card company.  Our outstanding amounts go on increasing at a very fast pace due to the addition of interest on the accumulated outstanding and in no time at all, we would have incurred a huge burden of debt. So we revolve the credit from one credit card supplier to another.  If we are not able to clear the debt due to incurring huge credit beyond our repayment capacity, we end up accumulating credit cards and bad credit.  All the credit card companies report to the credit bureaus monthly and our credit worthiness is determined accordingly.  We need to have good credit worthiness for all the important things in life like good employment, good accommodation, good education for our kids, good social life, and so on.

If we do not remedy the situation, the bad credit eats up our credit worthiness and a time may come when it will be very difficult for us to get credit cards due to our bad credit history.  If we do not have sufficient resources to support our lifestyle then the bad credit becomes a vicious cycle and it is very difficult to emerge out of it.

So beware! Inculcate a disciplined habit of using credit cards wisely and stay away from bad credit.