For someone who never had the responsibility in stewardship of financial matters, a credit card seems like a dream come true. Possessing a credit card allows the user to make transactions in the absence of physical money. But the dream can easily become a nightmare if the credit card holder does not have enough money to pay for the monthly dues.

The common mistake of credit card holders is to make purchases beyond their financial capacity. They use the credit card indiscriminately without properly monitoring the charges made to the credit card. As a result, the dues eventually accumulate to an amount that the card owner can no longer afford.

Charges

Although credit card billing statements include a minimum amount due in the event that the card holder cannot afford to pay the whole amount, there are interest charges that would apply. Either the card owner is uninformed or do not have a clear amount of the interest fee, but even after paying for the minimum amount required for payment, interest rates are charged to the whole amount due for the month and not just the balance. Meaning if the bill for the month is $151.00 and the minimum amount due is $100, even after paying for the $100, but because the whole amount was not paid, the interest fee is applied on the whole $151.00 not just the remaining $51.00. Some banks charge as high as 30% in late charges.

Credit cards has corresponding credit limit. In the event that usage has exceeded the limit allowable, there are also corresponding charges that would apply.

Eventually, if the credit card holder maintains only the minimum amount due, the credit can bloat out of proportion making the credit much harder to pay in the end. The person would end up paying for the interests rather than the actual amount that was owed.

After unable to pay the balance on a regular basis, credit records would eventually be sent to a regulating body keeping track of people with bad credits.