Credit cards are often linked to bankruptcy. Part of this is just because Americans use credit cards for numerous purchases. Someone may be declaring bankruptcy primarily because of their medical debt, for instance, but they will still reference whatever outstanding credit card debt they have as part of the issue.
In some situations, however, credit cards end up being the main cause. There are two reasons why this happens.
Excessive spending
First and foremost, a credit card can trick you into excessively spending money. You don’t feel like you’re spending real money, and it’s easy to rationalize this decision. People often spend far more when using a credit card than they will spend with cash. Additionally, credit cards allow people to make purchases that they can’t afford and wouldn’t have been able to make if they had to use cash on hand. Essentially, credit cards are designed to psychologically trick you into overspending, and that can lead to bankruptcy.
Fees and interest rates
Secondly, credit cards often come with fees if you miss payments and with high interest rates on the outstanding balance. People sometimes believe that they just need to make the minimum payment, and the debt will eventually be taken care of. But, if the interest rates are high enough, the total amount of debt may actually be going up every month, even though that individual is making those minimum payments. The debt compounds over time and eventually becomes unaffordable.
Have you found yourself in this position due to credit card use? It can be frustrating, but you do have options, and you need to know exactly what they are.
