Explained in 60 seconds: Credit Card Debt

The world of credit doesn’t have to be so confusing.

Here’s a simple 60-second explanation of how credit card debt works. Credit card debt is revolving this means the more debt you put in by making charges the higher your bills are coming out on the other side. So the amount you owe each month changes based on how much you charge.

Each payment you make is split into two parts:

• paying off interest added
• and paying off the actual debt

If you only make the minimum payments required, the bulk of each payment made goes to interest. As a result, it takes a long time to pay off your debt, and credit card purchases can end up costing double or triple the purchase price with interest added. Plus if you rely too much on credit, your payments can get so big that you don’t have enough money to cover all the expenses and your budget.

If you want to be financially successful you have to keep credit card debt minimized.