According to Equifax Canada, the number of consumers that cannot pay their outstanding credit card bills is rapidly increasing (CBC News). With banks constantly slamming doors in consumer faces, many people find that credit cards seem to be the answer to money problems. Canadian consumers are consistently turning to credit cards to pay for car repairs, home repairs, and even everyday items. The problem with credit card debt is that this type of debt is a lot like quicksand for many consumers.
In the past, most Canadians hardly had any type of credit card debt, but this is all changing due to the current state of the economy. While banks are slashing rates, this hardly ever trickles down to the average consumer that is desperate for a helping hand in the form of a loan. In fact, during this year alone "...there was a 7.3 per cent increase in the national consumer delinquency rate... (CBC News)." This statistic has left a lot of Canadians with a massive amount of debt that seems to have no end.
While some consumers are desperately trying to dig themselves out of credit card debt, other consumers are beginning to realize that there are some alternatives to high interest rate credit card usage. Those that need loans are starting to look towards alternative lending options such as private lenders. Various private lenders are still offering great rates to most consumers - even those that do not have an ideal credit history. In almost every case, this is a far better option than "maxing out" any credit card.
In addition to providing great rates to consumers, these lenders also provide an easy repayment plan. Unlike constant credit card use, a onetime private loan can be repaid simply. Most private lenders work with consumers to come up with repayment terms that both parties can agree upon. After a loan has been paid in its entirety, a borrower is then free from any further payments.
Canadian consumer debt is higher than it ever has been before. While most consumers don't wish to use their credit cards as a form of loan, this often seems like the only available option. As traditional lenders continuously deny loan applications, many consumers have begun to turn towards private lenders. While the Canadian economy is still struggling to get back on its feet, private lenders are as solid as they ever were. This is great news to consumers that want to gain a loan, but don't want to rely upon high interest credit cards to survive.
Credit cards are no more a luxury, they are almost a necessity. So, you would imagine a lot of people going for credit cards. In fact, a lot of people posses more than one credit cards. So, the credit card industry is growing by leaps and bounds. However, the credit card industry and credit card holders are posed with a big problem called ?Credit Card Debt?. In order to understand what ?credit card debt? actually means, we need to understand the work flow associated with the use of credit cards as such.
Credit cards, as the name suggests, are cards on which you can get credit i.e. make borrowings (your credit card debt). Your credit card is a representative of the credit account that you hold with the credit card supplier. Whatever payments you make using your credit card are actually your borrowings that contribute towards your credit card debt.
Your total credit card debt is the total amount you owe credit card supplier. You must settle your credit card debt on a monthly basis. So, you receive a monthly statement or your credit card bill which shows your total credit card debt. You must pay off your credit card debt by the payment due date failing which you will incur late fee and interest charges.
However, you have the option of making a partial (minimum) payment too, in which case you don't incur late fee but just the interest charges on your credit card debt. If you don't pay off your credit card debt in full, the interest charges too get added to it. So your credit card debt keeps on increasing, more so because the interest rates on credit card debt are generally higher than the interest rates on other kind of loans/borrowings.
Further, the interest charges add on to your credit card debt each month to form the new balance or the new credit card debt amount. If you continue making partial payments (or no payments) the interest charges are calculated afresh on the new credit card debt. So you end up paying interest on the last month's interest too. Thus your credit card debt accumulates rapidly and soon you find that what was once a relatively small credit card debt has ballooned into a big amount which you find almost impossible to pay.
Moreover, if you don't still control your spending habits, your credit card debt rises even faster. This is how the vicious circle of credit card debt works.
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