What is Credit Card Debt?

Credit card is a plastic card which is used in paying for goods and services. It allows the user to take money as credit in advance for payment of these goods and then repay it back in a fixed amount of time. The repayment comes along with a fixed rate of interest. This money becomes debt which is to be repaid to the company. Hence credit card debt is a form of unsecured consumer debt. The reason for these debts is credit cards. The consumers are allowed to take a certain amount of money as advance in terms of cash and use it for payment. The amount of money which can be drawn has a limit called the line of credit. It is unsecured because there is no guarantee for this money and it has to be paid back without any security. If this amount is not paid then the debt keeps increasing in an alarming amount due to the penalties. These penalties are valid for late payments. This is enough to increase the debt. This also spoils the customer’s record with the other creditors and they end up increasing the interest rate.

When a customer of a credit card company uses the card to purchase certain goods and services, this results in debt. This keeps increasing in the form of interest and also through other payments made through the card. This also increases when the customer does not pay back the company for the money which they spent. This results in lot of complications and an increase in debt. The company will charge a late payment penalty if the money is not paid back in time. This is an acute example of credit card debt and they will report this late payment to credit rating agencies.

Credit Card Default

This is very common in Canadian companies. In case the payment is late then it is referred to as being in “default”. The late payment is enough to increase the customer’s debt to an alarming amount. When a customer is late on his payment then his reputation with his other creditors is also spoilt. Even though he might have paid their debts on time they might end up increasing their interest rates the consumer is paying. This is called the universal default.

Credit card debt said to be the highest in industrialized countries such as Canada. A normal consumer’s debt starts accumulating since his or her college days itself. There are various ways to relieve this debt. This can be done by requesting a reduction in the annual percentage rate. This can be done only by those people who have an account with them. These account holders have an added advantage in many ways. In Canada it has been found that on an average 56 percent of the customers received a lower annual percentage rate. This included people from decent credit backgrounds too. On an average the percentage went from 16 percent to 10.47 percent. This was found out by a survey which was done by contacting their credit card issuers.