What is Credit Card Debt?

A credit card is issued by an issuer (ie. Bank) to a holder, who can use the card to pay for any goods and services being offered by a merchant. The issuer pays the merchant base on the cardholder’s promise to pay the issuer of the price paid plus other fees and charges that have been agreed on.

Credit Card is one of the breakthrough that the financial world has created to simplify, and in other ways, complicate an individual’s way of living. Credit card debt can be created via two approaches. The first approach would be by purchasing goods and services using the bdo credit card.

Image result for shopping with credit cardThis way of purchasing can be done by visiting a shop who is accredited in that mode of payment. With the advances we have in technology and the rise of internet convenience, credit cards can now also be used to purchase the same goods and services found in traditional shops through an online facility. Without being mindful of the purchases, credit card debt can slowly accumulate and burden us with its payment.

The second approach one can accumulate a credit card debt is a loan through a cash advance facility that most credit card companies provide. This type of approach usually yields a much higher interest than the first approach. Most often, the card has a separate limit as well for the cash advance feature.

Image result for shopping with credit cardCredit Card debts are not bad and can be beneficial in building one’s credit as long as the cardholder maintains a level of debt that they can payoff. Unfortunately, there are cardholders who lose track of the debt they accumulate hence paying off the debt becomes a burden. Adding the interest rates that a credit card company requires to be paid in addition to the credit used, the total fees may balloon to a significant amount which the cardholder may find hard payback.

Knowing proper credit management by monitoring borrowing and spending should be able to help the cardholder maintain a reasonable amount debt. This in turn may work for the cardholder’s advantage by raising their credit standing.