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In the past, credit cards are considered a luxury. However, the situation has changed. Nearly everyone will have a credit card nowadays. A lot of people are purchasing with their cards.

What you may also be aware is that there is a big problem associated with credit cards. It is called credit card debt. You may be curious on the actual meaning of this. Yet you will be able to know that if you can understand how a credit card works.

When you get a card from the supplier, it will offer you some credits, which is the credit card debt (loan) you can borrow. When you are purchasing with your card, you are in fact borrowing from the bank or the card supplier. And the borrowings will become your credit card debts.

In most cases, you have to settle the debt each month. You have to repay according to the monthly statement. However, if you fail to repay, you will be charged with some late fees and interest. In fact, you do not need to repay all the credit card debt. There is a minimum amount you have to settle every month. Of course this will mean that you have to pay the interest. The interest is actually associated with the debt.

If you cannot pay off all the credit card debt and pay the minimum payment instead, the interest will add up and it will be just like a snow ball. You will get more and more credit card debts. One thing you should know is that the interest rates associated with the cards are usually very high. It is a lot higher than some other loans such as mortgage.

The credit card debt can accumulate very fast if you only pay the minimum amount. As a result, most people will find it nearly impossible to repay the debt.

In order to avoid this kind of debts, you should try to control your spending pattern. If possible, purchase with cash instead of using the card. Otherwise you will just fall into the vicious circle of credit card debt!