Wisconsin residents know that holiday overspending using plastic leaves many people with substantial debt that can take years to pay off. The best way to deal with the problem is to understand the realities of credit card debt and make more informed decisions.
Credit cards are really loans in which unpaid principal rolls over each month, with the addition of compounding interest. Because both the principal and the interest earn additional interest and late fees, as well as fees for going over one’s credit limit, credit card debt tends to mount faster than snow in a holiday blizzard.
One of the biggest problems with excessive credit card use is the reduction of available credit for other things, especially emergencies. In fact, a credit card account should have enough available funds that the account can act as a safety net for urgent problems such as emergency car repairs and emergency room visits.
When debts continue to climb with continued credit card use and compounded interest rates from month to month, the chances of missing a payment increase, which only further adds to the problem. A person’s credit rating immediately suffers, a fact that can negatively affect employment and the ability to borrow in the future.
Unpaid debts often lead to calls from collectors, lawsuits by unpaid creditors and garnished wages if the amounts are excessive. Divorce is often the result of interpersonal stress from massive debt.
If other options are not working out and a debtor has nowhere else to turn, holiday debt, including credit card debt, may be dischargeable through a personal bankruptcy filing. Although a bankruptcy filing affects one’s credit rating for awhile, it can more immediately create relief from overwhelming debt.
Source: The Buffalo News, “Holiday debt can turn joy into sorrow,” Samantha Maziarz Christmann, Nov. 18, 2013