Six Things You Need to Know about How Your Debt Adds Up
Tuesday, January 28, 2014, 1:00 AM | Leave Comment
As you stare at the latest video game system on the shelf of your local store, you contemplate taking out your credit card and taking the system home.
But before you start using your credit card for impulse purchases, you should become familiar with how your debt really adds up and how it can get out of control before you know it.
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Endless Cycle
One of the ways your debt adds up is when you get yourself into an endless cycle of credit card payments.
It all starts when you run your debt up to the point where you have to use credit cards because you are low on cash.
Using your credit cards increases your monthly minimum payments and you soon find yourself more reliant than ever on using your credit cards and deeper in debt than ever before.
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Late Fees
When you make late payments, late fees and interest work together to boost your debt. Most credit cards have fees they add to your balance if you make a late payment.
The worst part is that interest gets added to those late fees, making your debt increase even faster.
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Your Interest Rates Keep Climbing
Every credit card consumer needs to learn more about the effects of late payments on their debt.
You can check out information at websites such as http://www.lexingtonlaw.com/credit-education/credit-repair-company/ to understand how debt is accumulated and why it is so difficult to get rid of.
Standard interest rates are bad enough, but most credit card companies raise your interest rates when you make late payments.
If you are not paying attention, your credit cards could be adding 15 percent interest on top of your balance and causing your debt to spiral out of control.
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Missed Payments
If you do not get your debt under control, then you start missing credit card payments and your debt is compounded even more.
Your credit card companies may decide to raise your monthly minimum payments even more to make up for what has not been paid and the endless cycle just gets worse.
If you skip payments enough, they may even close your account and send your debt to collections, which will have a negative impact on your credit score.
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Raised Limits
When you do manage to get your credit cards caught up, your credit card companies will make the dangerous move of raising your card limits.
When your limits are raised, you are notified with a letter in the mail. When you get that letter, you need to call your credit card companies and ask to have your limits put back to where they were.
Higher credit limits means more credit spending and higher debt. If you can control your spending, the higher limits may help raise your credit score by lowering your debt to credit radio.
However, if you are a big credit spender, you may not want to give yourself the temptation of spending to your new limit.
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It Can Be Stopped
The most important thing to know about your credit debt adding up is that it can be stopped.
With self-control and help from financial professionals offering credit management services, you can stop your debt from adding up and get control of your finances.
Debt can be hard to get out of. It can turn into a vicious cycle of paying and spending. There are many things you can do to control your debt.
Learn more about how your debt adds up and then take control to plan a budget and start lowering your debt.
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