Credit card payment structures are devised to keep a consumer paying for thirty plus years as a revolving debt. The monthly minimum payment required is usually between 2% and 3% of the total balance. That will keep you in good standing with the bank and you'll be reported as being current on those accounts. You'll be in good standing with the banks because you'll be paying back your debt forever and paying a whole slew of interest along the way. By paying the monthly minimum payment each month, you're basically backing yourself onto a cliff that eventually you could slide down. At the rate of paying back about 2% of the balance, the banks know you'll be an asset on their books forever.
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Paying back just the minimum payments leaves you in a position in which missing a payment becomes more likely if there is an unexpected circumstance that causes you to miss a month.
Whenever you fall behind on making your monthly payments for a credit card, you become susceptible to several different negative effects. The first negative affect you will normally experience is an increase in the interest rate pertaining to that particular account. In fact, due to universal default you could actually be penalized on other accounts that you have, even if they are in good standing. Potentially, you could see an increase in your interest rates across the board on all of the accounts that you have.
Something else that may initially occur is a decrease in your credit line. That could just happen to the account that fell into a delinquent status or again, it could potentially happen across the board. This puts a tremendous bind on many people's lives because they'll no longer have the cushion of that previously available credit. At that point, it could be almost impossible to survive when you no longer have the same funds that you're used to having access to.
For some people it brings about an even bigger problem though. When your credit line is lowered like that, it can leave you in a bad position of having an extremely high balance, or even worse, pushing you over the credit limit altogether. Once this happens, it becomes very difficult to catch back up. The fees associated with a situation like this can be very overwhelming.
Many people that feel overwhelmed with credit card debt try to turn to bankruptcy. It may seem like the easiest and quickest way out of debt, but that is not really the case. Bankruptcy can be one of the quicker ways out of debt, but it is not the easiest. Unfortunately, there is no painless way out of debt once the situation gets out of control, but bankruptcy can be one of the most grueling and long lasting solutions. It can cost quite a bit of money to hire a bankruptcy attorney and depending on your situation, you may be put on a very strict court-determined budget. That process can actually take as long as it would for you to handle the situation yourself by hiring a credit counseling or debt settlement company. Bankruptcy should be your absolute last option.
The trick is to always keep your balances on credit cards below 50% of the total credit line. By doing that, the information that's reported monthly about you to the credit bureaus will always be in your favor. That also keeps you in a comfortable position in which any unexpected circumstance won't put you in a huge hole right away. If you had to miss a payment or two you would still be in a position to rebound quickly and get back on track.
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