Although credit cards provide convenient and on-demand purchasing power beyond your stream of income, they also come with factors that can make the debt costly and potentially impossible to pay back. Want to know why credit card debt is so difficult to pay off? Creditors have three significant advantages in keeping you on the debt treadmill.
Inefficient Minimum Payment Schedule
Your credit card balance goes up and down based on your charges and ability to make timely payments. How much you’re required to pay each month to keep your account in good standing is calculated by taking a percentage, which is usually around 2.5%, of the balance during each billing cycle.
By paying such a small fraction of the debt each month, creditors can keep you in the debt cycle to collect as much interest as possible. Payment schedules are designed to keep you running on the debt treadmill, not help you get off it.
Half Of Each Payment Goes To Interest
You’re not even paying that full 2.5% of the debt each month. With average interest rates being 15%, only around half of your minimum 2.5% payment is going toward the original debt. The other half is paying the interest. If your interest rate is 20%, then only a quarter of your payment is going toward the debt.
Penalties Can Turn A Hard-to-Pay Debt Into An Impossible-to-Pay Debt
If you’re late or unable to pay the minimum, the creditor can apply penalties to your account. One late fee can discount several months’ worth of payments, but it’s the penalty APR that will sting the most.
Penalty APR goes into effect if you miss a payment by more than 30 days or are late multiple times. It can double your interest rate until you’re able to make six consecutive full and timely payments. Most people struggle to keep up and recover once penalties start getting applied.
Achieving Debt Relief
The credit structure in America is designed to keep you in debt. The only way to get out of debt is if you are proactive in pursuing relief. Many people attempt to reanalyze the way they approach credit card debt payment which often involves a reappropriation of funds. As ideal as this may seem, it can be difficult to achieve when you have multiple streams of debt. Oftentimes, choosing to pay more on a credit card bill results in another bill going unpaid, ultimately causing more long-term issues.
If you realize that handling your credit card debt issues independently no longer seems to be an efficient option, reach out to a debt relief professional. Heather Benveniste with Benveniste Law Offices has long helped Illinois debtors achieve relief without filing bankrupt. With over seven years of experience as debt collection attorney and can also serve as your legal representation if facing a creditor lawsuit. Contact us today at 1-800-497-5358 for a free case evaluation.