Bad Credit Is Contagious

It is more than likely that you are familiar with the negative aspects of credit cards debt. Plastic cards are the most common means by which people enter into credit cards debt, and the situation can quickly lead to an overall state of bad credit and a need to take out loans for debt.

This type of debt is an example of unsecured consumer debt. While these cards can be very convenient, they have been known to encourage both irresponsible spending habits and a decrease in financial discipline. Yet, millions of people around the world still use them. Many argue that credit cards are more trouble than they are worth. Many then make their situation worse by choosing to take out loans for debt relief when they owe too much and can' t make the payments on credit cards. Because the client often thinks of the credit card as a bottomless pit of money, the client does not allow for wise planning and attention to budget that stems from using only cash to make purchases.

Credit cards debt occurs when a client of a credit card company buys something via their card. Things get even worse for the customer when monthly bills aren' t paid on time. Fees ranging from fifteen to thirty dollars are applied to payments that are late even by one day. Every time a consumer is late with a credit payment, the credit company reaps huge rewards. In addition, penalties apply, interest rates rise, and the creditor makes millions. Credit companies thrive while the consumer is buried under a mountain of credit card debt.

The consumer, accrues more debt, meanwhile and falls further behind. Sometimes the only effective way is to get a credit card consolidation loan. Credit agencies are immediately notified when a cardholder has defaulted or missed a payment. Almost as damaging to credit card customers is the effect these failures to pay have on credit ratings. The result is that the consumer's record is marked. Finally, if a customer continues to default, other creditors may increase their interest rates for that customer, even if the individual has paid all of the debts to that particular company. Bad credit is an awful thing to have, as people's credit scores suffer and make it very difficult to be approved for a loan to buy a house or car.

This is known as universal default and only makes the situation worse for someone who is struggling to get out of debt. Although the evils of credit cards debt are well known, this type of debt is increasing in nearly all industrialized countries. Bad credit is contagious. More depressingly, the average U. This slippery slope leads to loans for debt relief, which tend to make matters worse. S. college graduate starts post- college life with more than$ 2, 000 in credit cards debt.

The best way to avoid the pitfalls of the little plastic card is to budget appropriately and to focus on one's expenses.