What is Credit Card Debt?

Credit cards are undoubtedly the most accessible form of borrowing available to consumers, with more credit cards in the UK than there are people. As a result, credit card debt is an increasingly common concern for many borrowers and their families.

Credit card debts, which can include any debts incurred on a mainstream credit cards as well as store cards, often incur considerably higher interest charges in comparison to other forms of lending, meaning that debts can grow and a much faster rate.

Late fees and default penalties are also an issue which can further compound credit card debts, making it increasingly difficult for struggling borrowers to contend with their credit card debt problems.

Topics covered in this article:

• What are the problems with Credit Card Debt?
• Why is Credit Card Debt such a big issue?
• What is the solution?

What are the problems with Credit Card Debt?

Credit card debts can become increasingly difficult to resolve due to a number of reasons. Firstly, the availability of credit makes them an easy form of borrowing and secondly, the APR rates attached to credit card debts is often considerably higher than other forms of credit, such as a personal loan or hire purchase.

It is however, extremely important to get on top of your credit card debts at the earliest opportunity. Allowing your credit card debts to get out of hand has a number of implications including:

• You may be charged penalty fees for late or non-payment. Not only that, but the amount of interest charged on your next statement will be increased.
• Problems with credit card debts can lead to blemishes on your credit score, including CCJ’s, defaults and even bankruptcy.
• Having a record of problems with credit card debt can lead to you having difficulty in obtaining credit or finance in the future.

Why is Credit Card Debt such a big issue?

One of the attractions of credit cards and store cards was that they provided very easy access to credit. In addition, promotions run by lenders and retailers made them an attractive form of borrowing which, if used correctly, would reward the borrower with discounts and benefits for using the card.

However, such easy access to credit led to many people having difficulties repaying their debts, particularly if they had a change in circumstances that affected their financial position.

This situation was worsened due to credit card debts attracting comparably higher rates of interest as well as penalty fees for defaults and late payments.

What is the solution?

Debt-Free can advise on the best course of action to take based on your personal situation with the help of our Debt Calculator.

This useful tool can instantly assess your situation and offer a number of possible routes that you could take on the road to solving your credit card debt problems. These options include an IVA, credit card consolidation and trust deeds.