In general, the cost of living seems to be rising faster than the typical household budget can accommodate. No problem! If cash is short, simply whip out the little plastic rectangle from the wallet, and basic needs, and many wants, will not have to be sacrificed to a shortage in finances. Actually, used in excess, credit card debt can fast become a really big problem, and insurmountable financial woes are lurking around the corner.



Used in moderation, credit cards are an excellent tool for making necessary purchases. For example, possessing large amounts of cash seems like tempting would-be pickpockets and muggers to "pick me!" Rather than opening a wallet to reveal the entire vacation budget, travelers often opt to use a credit card for financing the journey. Actually, the practice is a smart idea, under one vital condition: avoid credit card debt; pay the subsequent bill in its entirety.

For the rare individual, a credit card is an excellent means of controlling the budget and earning cash back, or significant travel rewards. Used carefully, a credit card can be implemented for paying all the regular bills, groceries, and gas. Then, at the end of the month, when the bill arrives, the amount is paid in full with a single check or an electronic funds transfer.

Unfortunately, a growing number of credit users are experiencing the financial woes of credit card debt, because the bill cannot be paid in full during the billing cycle. Month after month, the unpaid balance continues to grow, and in no time at all, the card is maxed out. In addition, once someone has one active credit card account, the mailbox is soon inundated with offers for introductory rates on additional cards. Soon, one card-for emergencies only-soon becomes 2, 3, 4, or more cards.

At first, the credit seems like "free" money. With only a signature, a consumer can purchase the perfect outfit, electronic device, or any number of wants. Yeah! Tired of always having to feel deprived, or shopping for sales, the card seems like a dream come true, until the bill arrives, and the person wakes to a real-life nightmare. Now, the budget is even tighter, to included the new credit card bill/bills. Spending is out of control, and the consequences of credit card debt can be devastating.

The consequences are bills, bills, and more bills, compounded by the excessive interest on the unpaid balance. Generally, credit cards charge 18-23 percent interest. While the numbers may seem insignificant at the time, the additional monies owed for the privilege of paying the balance back over a long period can add up quickly. For example, an individual finds a nice television set on sale for $500. Instead of saving and purchasing a set when he/she can afford it, the credit card comes in handy.

Now, assume the credit card company charges 18% yearly interest, and the minimum monthly payment is 10%. An individual will take 2.5 years to pay off the single purchase, which will end up costing a whopping $575. Actually, most credit card providers only require a 2% minimum payment. Refigured, the single purchase will take almost 4 years to pay off, and the interest amount is an unbelievable $198! Free money? Nothing can be farther from the truth.

Credit card companies are not benevolent individuals graciously helping people out of the budget crunch. Like any business, the object is to make money. Instead of kind benefactors, some credit card companies are better described as relatives of loan sharks.

However, instead of breaking a person's legs if he/she is unable to pay the bill, credit card debt can destroy good credit. Now, the individual will have future trouble purchasing a car, buying a house, qualifying for student loans, etc. For some, bankruptcy is the only way out of credit card debt, and he/she can lose everything.

However, before diving into total depression over credit card debt, observe the light at the end of the tunnel. Free services are available to help people negotiate with lenders to reduce the amount of interest. Also, the debt counselors can consolidate all debts, reducing the interest rates, and bringing the payments down to a manageable amount, with a catch. The debtor is no longer allowed to purchase anything on credit, until the balance is paid. Otherwise, credit card debt will only get worse, with no recourse.

The best advice: do not depend on credit to fill shortcomings in the budget. Instead, refigure the budget, learn to conserve, do without, and save for major purchases. In the event a credit card must be used in true emergencies-like unexpected auto repairs or emergency room visits-pay the bill off as soon as possible, and always pay more than the minimum amount. Also, if the temptation to spend in advance is too strong, cut up the credit cards and throw them in the trash.

In summary, credit card debt is a growing problem. While the convenience seems like free money at the time, the consequences can be financially devastating. Although a credit card is great for emergencies or vacations, pay the balance in full or as soon as possible. Always pay more than the minimum payment requested, and stick to an affordable budget.