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Are credit cards really that bad?

For many people, credit cards are a double-edged sword that might help them out of a tough spot one month, while creating a new problem later on. The truth of the matter is that many people do not truly understand the way credit cards work, and how quickly they can get out of hand.

Credit cards are unsecured debt, which means that lenders who issue them know that they are lending money without any kind of collateral. This makes all credit cards a relatively risky investment on the part of the lender, even to those who have excellent credit scores. Of course, as we all know, you don't have to have great credit to secure a credit card.

Where things really get out of hand is the high rate of interest that credit card lenders charge for their service. Many people simply don't understand exactly how much these high rates of interest cost them, especially once they have a balance in the thousands of dollars.

If, for instance, you use a credit card and rack up about $10,000 in debt. If you only make the minimum payments, it is technically possible to pay the card off — but it will take a number of years, and ultimately you will end up repaying almost as much in interest as you repay in the original debt.

Bankruptcy is never an easy option, but if you are just coming to understand that you are in a mountain of credit card debt that is truly unmanageable, you may be relieved to know that it is an option that is available. Through a proper bankruptcy procedure, with the guidance of an experienced attorney, you can discharge your credit card debt and create a clean start while keeping your rights secure.

Source: The Motley Fool, "1 Mistake to Avoid When Paying Off Credit Card Debt," Nathan Hamilton, May 06, 2017

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